PRICE AND PAY CODE

I beg to move,
That the Counter-Inflation (Price and Pay Code) (No. 2) Order 1973 (S.I., 1973, No. 1785), a copy of which was laid before this House on 30th October, be approved.
This order embodies the Pay and Price Code of stage 3. It was laid before Parliament on 30th October and, subject to the affirmative resolution of Parliament, has effect as for prices from 1st November and as for pay from today.

There are two possible approaches to problems and policies for containing inflation. One is that suggested by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and his unexpected allies in the Labour Party who claim that the economy is dangerously over-heated and that no policy to contain inflation can work without drastic deflationary measures. That method would cause a sharp increase in unemployment which would be felt most swiftly and severely in the regions. It would lead, too, to under-utilisation of our total resources and a reduction in industrial investment.

The other approach is that the British economy has during the 1960s and 1970s, under successive Governments, performed poorly, that its poor performance is largely due to successive periods of stop which have discouraged investment by industry, and that growth has all too often been sacrificed in a vain attempt to curb inflation. Those views were set out in Monday's debate in an eloquent and persuasive speech by the hon. Member for Berwick and East Lothian (Mr. Mackintosh). He argued that there were only two ways to curb demand—unemployment, and an incomes policy. He submitted that in the present circumstances an incomes policy was the only acceptable alternative. That view was once held by the Leader of the Opposition, when he said that "one man's wage increase is another man's price increase".

As regards the Government's policies, my right hon. Friend the Chancellor made our position clear when he said on Monday:
998in present circumstances, I do not believe that we could control inflation without a statutory pay and prices policy. But, equally, we cannot hope to control inflation unless that statutory policy is matched by a resolute monetary policy. Both ale essential, but neither by itself is sufficient."—[OFFICIAL REPORT, 5th November 1973; Vol. 863, c. 641.]
I have no doubts on that score—no doubts that the Chancellor is right, if we are to preserve the gains to this country achieved by the standstill and by the wide success of stage 2. Those arguments were made clear to the House and to the country by my right hon. Friend the Prime Minister and my right hon. and learned Friend the Minister for Trade and Consumer Affairs in the debate on the draft code.

I shall not repeat the arguments or the figures, but I want to repeat the views of independent commentators that, without the policies of the standstill and stage 2, last year's rise in prices would, according to The Times, have been three times as fast as it was. According to the Economist, without the controls the RPI would now be 20 per cent. higher than it was a year ago.

Will not the right hon. Gentleman concede that before and during the election campaign of 1970 his party made it indelibly clear that it would in no circumstances be party to a statutory prices and incomes policy? Why have the Government now changed their attitude?

We made a long and determined attempt in talking to the CBI and TUC to come to an agreement on a voluntary policy. Those consultations went on for many months. They continued after the standstill and during stage 2. We had the most extensive consultations on what should follow stage 2, both in the debate on the consultative document, and with trade unions and others after publication. We achieved a wide understanding about ends, but we were unable to achieve agreement on means, and in those circumstances it was inevitable that, for the good of the country, we should adopt a statutory incomes policy.

Of course we should have preferred an agreement, and not to have to do this, but we would have been guilty of letting down the country and the House
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if we had persisted in the sort of doctrinaire policies which characterised hon. and right hon. Gentlemen opposite. The consultations—both sides of industry, including the trade unions have said that they covered every point they wished to raise—made it plain that changes would be needed on what should follow stage 2.

Just to be absolutely clear about the Government's view, is the right hon. Gentleman telling the House that he adheres to what was said during the election, or that he has changed his mind and was right to do so? That does not emerge from his speech.

What I was saying was that following the failure to reach agreement last year, we were right, in the interests of the country, to move to a standstill on pay, and we are right in present circumstances to continue with a statutory prices and incomes policy, combined with a firm monetary policy.

Clearly, to be effective the code had to remain as firm and as fair as possible in order to provide the stability needed for growth and investment. But equally clear were the wishes of virtually all those we consulted that the stage 3 code should be more flexible—flexible enough on the prices side to encourage investment and to provide the incentive for efficiency, and flexible enough on the pay side to give it more room for negotiators within the limit, and to encourage the more efficient use of man-power through, for example, the introduction of new pay systems, new efficiency schemes and more shift working. It is this difficult balance that the code sets out to achieve.

I know that some of my hon. and right hon. Friends believe that we have gone too far, and it is true that the new price code, in seeking to encourage investment, has been relaxed in some aspects, although tightened up in others, and as a result is more complex. But my right hon. and hon. Friends who expressed that view and who said that we were merely perpetuating inflation in the stage 3 code would take the same attitude whatever the provisions of the code, because they believe that the sole source of inflation
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and the sole key to controlling it is the money supply.

I do not believe that they are right in this absolute approach, for if they were, there would have been no price explosion in 1969 when the Budgets of 1968 and 1969 brought monetary growth to a virtual halt. Nor would inflation have continued with the rising unemployment that those two deflationary Budgets produced, reaching its peak in 1971.

Looking back with hindsight, one might say that we should have started earlier to rectify the mistakes of our predecessors, but that is no reason for suggesting that we should repeat them.

The right hon. Gentleman said he does not want to repeat the mistakes which were made by the previous administration. Will he tell the House whether the proposals for the Glasgow firemen meet the Government's policy?

I am sure that my right hon. Friend would not like to leave on the record a not entirely unchallenged analysis that in 1968–69 the money supply was merely the product of the domestic policies of the then Chancellor of the Exchequer. Does not my right hon. Friend agree that the money supply was very flush on account of the balance of payments surplus?

I was saying that the attempt to control inflation by tough money policies and by heavy increases in taxation did not succeed, but did produce unemployment. That is the mistake that this Government will not repeat.

I should like first of all to discuss the price side of the pay code—very briefly, because my right hon. Friend the Chief Secretary to the Treasury intends to deal with the matter at the end of the debate. On the price side, the profit margin control remains, but its effects are tempered in some particular respects with a view to encouraging investment and efficiency. Most of the changes were set out in the consultative document, but the House will see that in the final version of the code we have done our best in this matter, as
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with others, to meet the points which were put to us in consultation on the draft code and raised in the debate in the House.

Apart from the changes in the profit margin control, there are two other important changes from stage 2 which represent a significant tightening of the rules. They were both set out in the consultative document and there is some further adjustment in the final code. The first is very strict control on the subdivision of companies for purposes of profit margin control. New rules were set out and their purpose is to prevent artificial subdivision and to make control more effective in its application.

The second change concerns the notification requirements. Category 1 firms—the largest firms—still have to pre-notify four weeks before a price increase. The most significant point is the bringing of category 2 firms into the pre-notification arrangements. Previously they had to report to the commission at the end of the quarter.

The final arrangements for price notification were set out in a separate order made by my right hon. Friend the Secretary of State for Trade and Industry.

There are two other amending orders which I made last week, changing the notification arrangements for pay, and a further order, published today, setting out two additional special requirements for the construction industry. The first enables the Pay Board to make inquiries of the main contractors on all large sites and the second requires construction firms to make regular specimen returns of the earnings of their employees and of payments made to labour-only sub-contractors.

Has the right hon. Gentleman left the question of the Price Commission? If so, I should like to ask a question about it before he moves on to pay. It is about the position of Members of Parliament who are trying to find out whether a price increase has been authorised. I have been in touch with the Price Commission twice this week and I should like the Secretary of State to tell the House quite plainly whether, if the Price Commission does not restrict or reject a price increase, Members of Parliament or members of the public are to
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be allowed to know that that is the case. Otherwise how can consumers know, when they pay higher prices, whether those higher prices have been allowed by the Price Commission?

The right hon. Gentleman led the House to believe that category 2 companies now assumed exactly the same identity and status under the code as category 1 companies, by using the words "they have to join in the notification system". Would it not be more accurate to say that, while they join in the pre-notifications, they do not have to await the approval of the Price Commission, and the worse that the Price Commission can do is to ask for retrospective cuts in price, which is a different thing altogether?

Category 2 firms have to wait two weeks, as opposed to four weeks, before they put up a price. If they are not restrained during those two weeks, they may put up the price, but they are still subject to having the price rolled back. That is a strengthening of the control on category 2 firms.

On a point of order, Mr. Speaker. This is a point of substance. I asked the Minister whether Members of Parliament would be allowed to obtain necessary information from the Price Commission. The Minister says that he does not know the answer. If Members of Parliament are restricted and restrained in obtaining information necessary to do their parliamentary duty, it is not a point of policy but a point of order for the Chair. As a Member making inquiries of this body, I am told by it that it does not know, and the Minister does not know. This prevents Members from performing their normal political duties.

The right hon. Gentleman may be raising a point of substance, but it is not a point with which the Chair can deal. The Chair has no responsibility for the way in which Ministers carry out their ministerial duties. That is the responsibility of the Ministers.

I am not prepared to rule on that. The hon. Member must submit his Question. I shall look at it, if necessary, but the Table will consider it first. If the hon. Member disagrees with the decision of the Table, then it will come to me and I shall make the final decision. I shall not, however. rule straight away from the Chair on a matter of that sort, and I do not think that any of my predecessors ever have done so.

This is a matter with which my right hon. Friend will deal in winding up the debate. I have already said that my right hon. Friend may be dealing with most of the questions on prices, and I would now like to get on with what I have to say on pay.

The more general changes that were made in the stage 3 arrangements for notification mean, first, that the Pay Board must be notified in advance, regardless of the numbers of workers involved in any increases under the new provision concerning standstill anomalies or new efficency payment schemes. The board must be informed also of the proposed rates of pay for new work where more than 100 workers are involved. It will, however, no longer be necessary to notify the board of improvements in pension or payments under the new provision for threshold arrangements.

The Pay Board has identified areas of anomaly arising out of the standstill, and these are to be rectified during stage 3. It is now proceeding with a more complex task—the examination of the wider problem of relatively. I hope to have a report from the board by the end of the year.

On a point of order, Mr. Speaker. You have said—and you may be right—that the matter of prices being notified by the Government in some shape or form is not one for the Chair. I draw your attention, Sir, to a not dissimilar incident a few months ago at the first sitting of the Standing Committee considering the Finance Bill, a Committee which, I think you will agree, has the same rights and powers as the Chamber in matters of that
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kind. We were then debating the question of a Geneva protocol to do with the raising of money in a loose association with the EEC and EFTA countries. Our deliberations resulted in a series of points of order in which some of my hon. Friends took part and, possibly, some hon. Members on the Government side. It became apparent that the debate could not continue without the opportunity for all hon. Members, not merely the Opposition, to know precisely what the Geneva protocol contained.

A long search was made, both in the Library and outside. The result was that the Chairman of the Committee deemed it necessary to suspend the proceedings so that the Minister and his advisers could attempt to discover the document and enable the Committee to proceed on a proper basis. I raised the matter on the Floor of the House the following day, when, almost certainly, you were in the Chair, Mr. Speaker. The matter was deliberated on further when the Geneva protocol had been found.

This incident is not dissimilar, so is there not a prima facie case for adourning this debate?

I listened patiently to the hon. Member, and perhaps I shall refresh my memory on what happened in Committee, although that is not a matter for me. I shall refresh my memory also as to what happened on the Floor of the House, but I shall do so only as a matter of interest. As far as today's proceedings are concerned—the hon. Member said I might be right—in my view I am right, and the debate must continue.

Further to that point of order, Mr. Speaker. I appeal to you to consider the position in which the House finds itself, which applies to hon. Members on both sides. A very important question about the right of access to information for Members of Parliament has been put to the Minister. First he says that he does not know. Then he says that his right hon. Friend will answer at the end of the debate. Both of those statements cannot be right. I urge, Mr. Speaker, that you consider a motion to adjourn the debate, or to suspend the sitting for five minutes, so that the Minister may find an answer to the question, without which the debate cannot meaningfully proceed.

Further to that point of order, Mr. Speaker. If it will help the right hon. Gentleman, I can draw his attention now to the relevant part of the statutory instrument. It is there in black and white. The gag will be imposed by the Government, and the right hon. Gentleman knows that perfectly well. He is evading the question.

These matters have been raised as points of order, but they points of debate. They may be powerful points of debate and grounds of attack upon the Minister in the House, but they are not matters of order for the Chair.

Further to that point of order, Mr. Speaker. With respect, as Speaker of the House and, therefore, in charge of the conduct of debate, is it not for you to ensure that the debate is conducted in such a way that information is readily available to enable it to continue?

The debate, as you have seen, has within a matter of minutes turned into a series of points of order and questions because of lack of information. Surely, therefore, Sir, this is an occasion on which you should express a view on the supply of information to the Front Bench in order to make it possible for the debate to continue. If the information is not supplied until the end of debate, that is far too late.

Ministers will not answer questions on price increases by individual firms in stage 3, any more than in stage 2. Price increases are the firm's responsibility, not the Government's. An hon. Member who wants to know more about a price increase should ask the firm. The Price Commission will continue to make quarterly reports to Ministers which must be put before Parliament. The change in the approvals procedures in no way affects that obligation. The commission will also issue comprehensive information about prices notifications that have been rejected, withdrawn or modified.

Will the right hon. Gentleman now tell the House this? If Members of Parliament or members of the public try to find out whether a price increase has been authorised and the firm says that it has been but the Price Commission declines to deny or confirm whether that increase has been justified, how is the consumer and how are Members of Parliament to know whether the firm is telling the truth? Is that a proper way to treat members of the public or Members of the House of Commons?

Members of the public have the opportunity to complain to the firm and they have the opportunity to report, as has been set out in the course of the legislation and subsequent debate, to the Price Commission any price increases which they think are unreasonable. That procedure continues.

I must get on. I have established the point of fact that the right hon. Gentleman wanted. Hon. Members can raise any points of disapproval they may like in the course of their speeches, if they catch your eye, Mr. Speaker. My right hon. Friend who will be winding up the debate can take up those points. The hon. Gentleman complains that he could not discuss this matter as the information was not available——

On a point of order. Do you not agree, Mr. Speaker, that the failure by the Minister to give way on questions concerning the rights of Members of the House to question matters in the House constitutes a point of order?

I have given the right hon. Member for Bristol, South-East (Mr. Benn) the information he required. I have made it clear that there is no suggestion
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that the commission would refuse to answer a question about a price increase. Any points that he or other hon. Members may wish to make are those which they can make in the course of the debate.

As the right hon. Gentleman has now told the House that there is no question of the Price Commission refusing to answer questions put by Members of Parliament, will he give us a clear assurance that any Member of Parliament who, on behalf of a constituent, asks whether a particular price increase has been allowed by the commission will be given an answer—because that was not the position I was given to understand when I telephoned the commission earlier today?

I said that there was no suggestion that the commission would refuse. The right hon. Gentleman tells me that it has refused. I shall look into that. I was told that there was no question that the commission would refuse to answer a question about a price increase. That was the point on which I was quite clear. If I was wrong, my right hon. Friend will find out the facts.

In the meantime, the Pay Board will continue to discharge its job of securing the observance of the code, and as from today, subject to the approval of the House, the code for stage 3.

I hope that negotiators will continue to realise that the board is solely responsible for approving pay settlements. The firemen's settlement, as has been made clear, will have to be reported to the board.

I am not in a position to say whether that settlement falls within the terms of the code. That is for the board. But what I can say is that the firemen were
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perfectly entitled to abandon a stage 2 settlement since it had not been operated. It obviously made good economic sense to them to forgo a stage 2 settlement from 1st October, within the fairly tight limits of stage 2, in favour of the greater flexibility available under stage 3. But the new settlement can operate from today only if approved by the Pay Board.

Although it has been made clear from the start that stage 2 settlements could be abandoned in favour of one coming within the terms of stage 3, this can have only very limited application, because a stage 2 settlement cannot be renegotiated if it is already in operation, and because a stage 3 settlement cannot be back-dated beyond today.

The hon. Gentleman has asked me a question with which I shall deal in detail later in my speech.

Another matter of some concern is the shortage of labour in London, and elsewhere, too. The Government have recognised the cost factor of working in London in two ways. The first is by allowing London allowances to be raised outside the pay limit in stage 3 in accordance with the formula of the old National Board for Prices and Incomes. The second is by asking the Pay Board to go into the whole question of London weighting. My right hon. Friend the Chief Secretary intends to discuss some aspects of this problem. All I would say now is that I do not believe that it can be dealt with through stage 3 code.

Shortages of manpower in London—and elsewhere—are not a new phenomenon. They most certainly have not been caused by the counter-inflation policy. As far as public services are concerned, the sort of free-for-all demanded by hon. and right hon. Gentlemen opposite is likely to leave them worse off in the competition. When there was a free-for-all, much of the public service had to rely heavily on immigrant labour.

To try to meet general labour shortages by special pay increases would merely raise the level of cost at which the competition for scarce labour is conducted—with inevitable consequences for
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costs and prices. Shortages of manpower are a consequence of the economic growth that most people desire. We shall have to learn to live with them and to cope with them by improving our use of existing resources. Of course this produces strains but not, in my view, so great or so damaging to the economy as a whole as the two remedies suggested—a return to policy of stop, or a surrender to wage inflation.

I think that the situation was made clear at the beginning of my speech, when I quoted my right hon. Friend the Chancellor of the Exchequer as saying that, in present circumstances, the control of inflation required a prices and incomes policy, together with a strong monetary policy.

The right hon. Gentleman referred to the better state of affairs which now exists in the public sector. Has he forgotten the position of the technical staffs in the electricity supply industry, who have been abominably treated under stage 1, stage 2 and stage 3?

I said I thought that the public sector would be worse off if there were not an incomes policy.

As the hon. Gentleman knows, I am familiar with the problems of the EPEA. I have discussed them at some length, and both my Department and the Department of Trade and Industry are in contact with the engineers. I hope that they will negotiate within the terms of the flexibility arrangements in the stage 3 code, which give them considerable latitude of movement. I know that they were disappointed at not being included in the anomalies provision, but that is a matter for the Pay Board.

The right hon. Gentleman does not understand the situation now any more than he did on 27th February. The power supply engineers have been negotiating for 11 months, both before and since this policy was introduced. It is absurd to talk about negotiating.

No one in the Government or the Pay Board is preventing them from negotiating to reach the sort of settlement they require.

Since the agreement they originally reached was arrived at after the standstill, it was outside the pay limits, and they must now try to negotiate arrangements which are within the pay limits of stage 2 and stage 3.

I have already referred to some aspects of the Pay Code itself, and I now turn to two of the provisions on which there has been some misunderstanding, namely, the 1 per cent. flexibility margin, and the special provision for unsocial hours, both of which are slightly altered from the original provisions in the consultative document. I should also like to refer to the special arrangements for proficiency payments.

As regards the flexibility margin, we have now made it clear that any change which might be introduced, such as a new pay structure or an incremental system, must not be designed so that it will lead to higher costs in subsequent years.

There are two further points which I must emphasise about the extra 1 per cent. First, the conditions which are attached to it in the code may be applied to the whole settlement, and not just to the extra 1 per cent. For example, on restructuring, the point is not merely that there is 1 per cent. of the pay bill available for that purpose, but that if the main settlement is used to achieve some restructuring, then the limit for the settlement as a whole will be 8 per cent., rather than 7 per cent. That allows greater freedom for negotiators.

Secondly, I underline the point made by the Chairman of the Pay Board, that this does not imply an extra 1 per cent. for everybody, regardless. The code sets out the various purposes which must be met in order to justify this action.

Having quoted Sir Frank Figgures, perhaps I may take this opportunity of putting the record straight about something that he did not say, although he is widely believed to have done so. He is widely believed to have stated that the Pay Code would cause an increase in earnings of 13 per cent. He has told me that he never made such a statement.

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The House will easily see how this misunderstanding arose if I quote from the report, because it arose through the insertion into a report of Sir Frank's speech of a comment from outside. The first paragraph of the report says
Increases in basic pay under phase 3 of the Government's incomes policy are likely to be in the order of 9 per cent. to 10 per cent., Sir Frank Figgures, Chairman of the Pay Board, predicted yesterday.
That is perfectly correct. The second paragraph says:
This compares with just under 8 per cent. during phase 2, and indicates a rise in average earnings of about 13 per cent.
The third paragraph starts:
Sir Frank also said the board"—
and then went on to make another point. It was the second paragraph which was not a quotation from Sir Frank Figgures, although it could be easily interpreted as such.

This is an important point. Do we understand that Sir Frank Figgures was quoted as saying that he expected to flow from the pay aspects of the new code an average increase of earnings of 13 per cent. in the year ahead?

I do not think it is quite fair to the reporter to say that he was quoted as saying that. It was simply that, in the report of his speech, the report had the first three paragraphs, but paragraph one was a quotation of what Sir Frank Figgures had said, paragraph three was also a quotation of what Sir Frank had said, and paragraph two did not purport to be a report of what Sir Frank said but was a comment, or deduction from the first paragraph, made by the reporter and which, because of its juxtaposition, could give the impression that it had been said by Sir Frank himself. I merely wanted to make that clear.

The whole House should be grateful to the Secretary of State for correcting that, but did Sir Frank Figgures draw the Minister's attention to the misquotation, in which case why did he not correct it himself, or did Ministers draw the attention of Sir Frank to the statement and ask permission to correct it on his behalf?

I understand that Sir Frank drew the attention of one of my
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right hon. Friends to it and made it plain to him that he had not made this quotation and made it also plain in the letter to him that he was not equipped——

It was raised in the course of a debate by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). Sir Frank wrote to him to correct this misapprehension. He also informed me that he had not said it. I asked his permission, naturally, if I could make that plain to the right hon. Member for Bristol, South-East.

I am not altogether sure as to the status of the document from which the Minister is quoting and I am not sure who said what, but if we do accept that Sir Frank Figgures did not say it, what would interest me much more is the Minister's view of the validity of the comment. Is it right or is it wrong, who-ever said it?

The figure quoted in the White Paper forecast was 11 per cent., and that is as far as can be forecast.

We did not feel able to make any changes in the rules about efficiency payments which are set out in the consultative document, despite the many representations from various quarters. Some thought that the rules were too lax, but there were equal or stronger views that they were too stringent.

But the whole House knows the extent to which in the past so-called productivity deals were used to breach the policy with very little increase in productivity, and the Government are determined that payments under these schemes will be made only in respect of improvements in efficiency which are not merely promised but which are being demonstrated in practice. Only in that way will such schemes be genuinely self-financing.

The stage 2 code contained provisions for special payments or changes in conditions outside the pay limit—reductions of the working week to 40 hours, provision of a third week's holiday, improvement in pensions and a one-third step towards equal pay. These have been maintained, with some additions and improvements made since the draft code. The main additional payment provided
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for outside the limit in stage 3 is that of unsocial hours. It is designed to bring up to a reasonable level premium payments for those working shifts or unsocial hours.

A small improvement has been made since the draft code was published, which benefits those whose shifts fall partly in the unsocial hours as defined and partly outside.

It goes without saying that payments for unsocial hours will go only to those who work them. But the new minimum standard set out in the code for stage 3 has produced an offer to the coal miners which averages 13 per cent. Together with the possibility of another 3½ per cent. for genuine efficiency schemes, that represents a substantial advance for the mineworker. He will clearly benefit from the Government's efforts to encourage the more efficient use of plant and machinery and men by providing a new minimum standard of compensation for those working unsocial hours. That is an important point. The miners will benefit only if stage 3 sticks as the Government are determined that it should.

But one way in which the miners and everybody else could lose the relative advantage that they stand to gain from stage 3 is to return to a free-for-all. I said that efficiency payments are designed to be self-financing. Other payments outside the limit, both those continuing from stage 2 and those added in stage 3, notably the unsocial hours provision and the flexibility margin, have the same purpose—indeed it is the purpose of the pay limit itself—of giving two alternative methods for a negotiating group to reach a total of 7 per cent. or £2.25. It will give negotiators the greatest possible freedom within the code to enable them to make adjustments to their internal problems of relativities or to suit their special requirements.

That purpose would be frustrated if the Pay Code were not adhered to by all negotiators and strictly applied by the Pay Board. Of course there will be tensions. But right hon. and hon. Members opposite know very well that such tentions exist whatever the circumstances. In their hearts they know that the methods that they propose—a free-for-all on wages—can have only one result and can add only to the inflationary pres-
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sures which the Price Code has to contain.

Some right hon. and hon. Members opposite appear to favour a return to completely free market conditions—one favoured by some of my right hon. and hon. Friends—relying on deflationary measures and very tight monetary control and, in the case of the Opposition, adding massive increases in taxation.

In the present circumstances this would destroy all prospects of maintaining growth and all increases in industrial investment. It would lead inevitably to increases in unemployment, especially in the regions. It is for those reasons that I commend to the House the Government's policies in the stage 3 code.

I hope that the Secretary of State will believe me when I say that the comments that I shall make upon his speech are not directed to him personally, but it was the most disgraceful presentation of Government policy to the House of Commons that I have heard for many years. I want to deal with what the right hon. Gentleman said. Since he chose to seek to justify what was said in 1970, let me remind him, in his own words, what his own party said.

Its manifesto said:
Labour's compulsory wage control was a failure and we will not repeat it.
The Prime Minister, in his own election address, referring to Conservative policies, said:
Nor are they a set of promises made only to be broken. The last Conservative Government kept all its promises. So will the next one.
The Chancellor of the Exchequer, whose minion is winding up the debate, said:
We utterly reject the philosophy of statutory wage control.
The Secretary of State for Trade and Industry, in his election address, said:
We will replace Labour's restrictions with Conservative incentives. We reject compulsory wage restraint.
But the Minister who went furthest was the Secretary of State for Employment himself. He explained the policies which I have described and, in his election address, said:
In putting these policies foward, we have been particularly careful to make only those
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promises and pledges we know, after detailed study, we can keep.
His election address ended with these words:
We will trust the people. We will act with honesty. We will speak the truth—therefore, I seek your support.
It was on these policies that he got the power to impose this new, quite different policy upon the British people.

Indeed, the right hon. Gentleman has, of course, presented today the most complex and bureaucratic structure of controls ever imposed upon the British economy in peace or war. May I read what he said about that in his address? Talking about Labour policy, he said:
It is frightening to see in all this just how far officialdom has penetrated into all our lives and how helpless we all are in the face of bureaucracy.
The right hon. Gentleman should not treat the House of Commons as if we had no memory of the basis upon which he sought and obtained popular consent, and as a result of which he became a Cabinet Minister.

The right hon. Gentleman has presented a policy which we shall oppose in the Lobby tonight. It has been tried for a year and it has failed completely to reduce inflation. Even the businessmen, as I shall show from surveys of opinion, do not believe that it will work; the forecasts that they make are of accelerating inflation. The right hon. Gentleman confirmed, in his figure of 11 per cent. increase in average earnings, that he himself forecasts accelerating inflation.

The policy is principally designed to hold down wages rather than to check inflation. Inflation is being used as an excuse to destroy free trade union bargaining. The policy operates through boards and commissions not accountable to Parliament and behind which Ministers shield when they wish, while the commissions and the boards shield behind the Minister when they wish and the Speaker provides the protection of the Table Office to see that whoever is shielding behind the other is, in fact, prevented—[HON. MEMBERS: "No."] Of course that is the position.

On a point of order. It will not have escaped your attention, Mr. Deputy Speaker, that the
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right hon. Gentleman suggested that Mr. Speaker used the offices of Mr. Speaker's Department to shield the Government. Surely this is a most improper allegation and should be withdrawn.

I did hear the right hon. Gentleman say something which perhaps, if he had thought a little more carefully about it, he might not wish to say. As he knows, Mr. Speaker's Office, the Clerk's Office and the Table Office exercise on behalf of the House as a whole the utmost impartiality. I am sure that if he said anything which might appear to reflect on that system—even if, on careful reading of the text later, it did not—he would want to withdraw it.

What I said was that the Table Office shielded the Minister by virtue of the Price and Pay Code that is carried through the House. You know very well, Mr. Deputy Speaker—better than most—that if a Minister says that he will not answer a Question, then of course the Table Office shields the Minister from Questions on these matters.

There was no suggestion in my comment that the Speaker or the Table acted otherwise than in accordance with the principles of the House. What I am objecting to is that the Minister says that he will not answer Questions on prices and thus establishes the Table Office as the means by which that instruction is implemented for Members of Parliament.

Order. I appreciate what the right hon. Gentleman has said. The real trouble lies, if I may say so, in the use of the word "shields". If he says that the Speaker and the Table Office carry out the Standing Orders of the House and the rules of the House, then there is nothing to complain about.

It is not part of my purpose to imply—nor do I believe that I did imply—any criticism whatsoever of the Table Office. If the phrase that you prefer, Mr. Deputy Speaker, is that the Standing Orders of the House prevent hon. Members from putting down
1017
Questions, then of course that is a process by which a Minister escapes, by his own rules, the responsibility that he ought to exercise towards Members of Parliament.

Indeed, Sir, had you been in the Chair from the beginning of the debate you would realise that the whole issue of the Minister's speech rotated around the rights of Members. I wish now to turn to the question of those rights.

On a point of order, Mr. Deputy Speaker. It was clearly within hearing of hon. Members on both sides that the right hon. Gentleman referred not to the Table Office but to Mr. Speaker. Could you give us some guidance, Sir, on whether the debate could profitably proceed unless the right hon. Gentleman now made a withdrawal of his aspersions against Mr. Speaker?

The House must realise that when the Table Office is mentioned, that means Mr. Speaker, because Mr. Speaker is responsible for all the departments of the House. I do not think that one should lay too much emphasis on this. I think that I have taken the right hon. Gentleman fairly—that he did not mean to cast any aspersion upon Mr. Speaker or the Table Office. It struck me, as it struck other hon. Members at first, that perhaps he might have meant that. I realise now that he did not—he said that he did not—and I think that we should leave it there.

I am grateful to you, Mr. Deputy Speaker, for accepting the assurance that I gave that my remarks were addressed to the use of ministerial power and were in no way a reflection on either the Speaker or the Table Office.

But, having said that, let us be clear about the position of Members of Parliament. The Price Commission is set up by Act of Parliament. It is a creature of the House and it is subject in its rules to a Pay and Price Code passed by Parliament.

The Secretary of State was initially asked by me in the debate whether the Price Commission will be allowed to answer Members' questions about the price increases that it authorises. His first answer was that he did not know. His second answer was that the Chief
1018
Secretary would reply at the end of the debate. His third answer was that it is a matter for the firms concerned to deal with the price increases. In his fourth answer—this is what brought me to the point which I made—the right hon. Gentleman said that no Questions would be allowed in the House of Commons about price increases. HANSARD will reveal that that was what he said. When pressed further he said that there was no suggestion that the Price Commission would refuse to answer questions from hon. Members.

That is wholly different from the advice which I got from the Price Commission, from which I have been seeking information. I cannot complain about the commission's courtesy. The commission said on this point that it did not know the position and that the matter depended on the Minister. The commission said that it suspected that it would not be publishing price increases except in special cases. The position is not a matter of pride of parliamentary privilege, but a matter of giving information to the public.

If a shopper, while in a shop, finds that a price has increased, the retailer will say that it is nothing to do with him and that it is the manufacturer who has raised the price. So the shopper will go to the manufacturer, who will say, "Yes, of course I have raised the price. This matter has been before the Price Commission and it approved the price increase." The shopper will then telephone the Price Commission and ask if it has approved the increase. The commission will say that it does not answer questions about individual price increases and that the shopper will have to wait for the commission's quarterly report, in which the whole thing will be hushed up.

The shopper will then go to his Member of Parliament and ask whether the price increase was authorised. But the Member of Parliament has now been told that he has not the right to table Questions in the House, so even he cannot get at the Minister responsible. If the Member of Parliament telephones the Price Commission, he will be told that the information has not to be made public. This is the meaning of a bureaucratic structure which is designed to damage the interests of the shopper and
1019
prevent a Member of Parliament from doing his job.

The right hon. Gentleman has just said that it depends upon the Minister—as though the Minister could block an inquiry to the Price Commission. [HON. MEMBERS: "He has done."] Perhaps it also depends on the Member of Parliament concerned. I have just written to the Price Commission about the effect on temporary staff in London, the escalation of salaries paid, and the profits made thereon. I first got a prevaricating reply, but I pressed the matter and made clear that I wanted an answer, and I am going to get an answer. I have now been told that because of my persistence I shall get an answer. If one of my constituents thought that a price increase had been excessive, I would demand from the Price Commission that it should tell me whether or not that particular price had risen. I am sure I would get an answer, and no doubt the House will be treated in the same way.

If the Minister will not let us ask questions, and the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) will not let us give answers, we shall not make much progress.

The hon. Gentleman may not realise it, but the position is, that the Government have made a change in practice, and they have done so deliberately because of the political embarrassment arising from announcements on the radio every week about the Price Commission approving price increases. If the hon. Gentleman wishes me to go into great detail I can do so. The Minister for Trade and Consumer Affairs said:
The difference in future will be that where the commission decides not to restrict or reject
1020
an approval will be given by it."—[OFFICIAL REPORT, 17th October 1973; Vol. 861, c. 332.]
That is to be the technique. The manufacturer will claim that he submitted his proposed price increase to the Price Commission and that the commission did not restrict or reject it, while the commission will say that it did not approve it. Therefore, by Government decree, the consumer and the Member of Parliament will be kept in the dark, which is where the Government want to keep them.

The right hon. Gentleman has accused my right hon. Friend the Secretary of State of changing his ground. By the right hon. Gentleman's own admission, he has within the past half hour seriously misled the House. In my recollection, the right hon. Gentleman stated, in an intervention in my right hon. Friend's speech, that he had been in touch with the Price Commission and that it had given a specific answer that it would not be answering queries. He has now told a very different story in his own speech from what he said to my right hon. Friend.

The hon. Gentleman is quite wrong. I stated exactly what had happened. I said that I had made contact by telephone with the Price Commission twice this week to find out what the position was because I wanted to know its view. That was reasonable for a Member of this House to do. I was treated with great courtesy by the person to whom I spoke, who told me that he did not know the answer, that it depended on what the Secretary of State decided and that it was unlikely that the information would be made available, although there might be some specific cases of approval. Everything I was told by the commission today was confirmed by the Secretary of State in one of his answers.

This is an important point, and, quite rightly, the right hon. Gentleman has laid great stress on it. He is creating an entirely false picture in the minds of hon. Members that their position as representatives of their constituents in this House is in some way to be reduced. The fact is that, on behalf of a constituent, the other day I wrote to the Price Commission asking why certain of the Heinz baby foods had been given permission to be raised in price.
1021
Today I received from the chairman of the commission a three-page letter explaining in detail the criteria on which the price increase was permitted. The wider political point is that any suggestion whatever that the country or the House could be kept in the dark about price increases is obviously absurd.

The hon. Gentleman should follow this matter more carefully before giving his comments. If he refers to the same column of HANSARD of 17th October he will see that the Minister for Trade and Consumer Affairs pointed out that the Price Commission wanted
to ensure that the function of the Commission is clearly defined to be what in fact it is, that is one of rejecting unjustified claims and modifying excessive ones".
The Minister went on to say:
The Government agree with that recommendation and the statutory instrument, which is the Counter-Inflation (Notification of Increases in Prices and Charges) Order, will be amended accordingly, to abolish formal approvals …".—[OFFICIAL REPORT, 17th October 1973; Vol. 861, c. 332.]
The object of that change is to prevent people from being able to say that the commission has approved a price increase. Once one can get away from the knowledge that a price increase has been approved, then what the commission can say is "We have no comment. We did not approve it. We did not restrict it."[HON. MEMBERS: "Nonsense."] Of course that is what it is all about. Hon. Members opposite will learn this very quickly unless the Secretary of State, following what he said in his final answer today insists that the Price Commission gives these answers, which is what he said it would do in his fifth answer to my question when he said that there is no suggestion that the Price Commission will not give answers. If that statement is adhered to, we shall, if the Chief Secretary to the Treasury confirms it, have secured by this debate a change in Government policy.

I come now to another aspect—that of looking at the situation from the point of view of business. I turn first to prices and then to pay. On 1st November, The Times said:
The most terrifying aspect of the White-hall paper chase, which began a year ago when the Government hare did a U-turn on inflation policy, is that businessmen are only just fully understanding the complexities of the now
1022
superseded Phase Two. To have to pick up and digest another trail of orders strewn in their path (and this time the civil servants have excelled themselves in the tortuous sub-language parliamentary draughtsmen require) means further delay in comprehension. So what should the corporate adviser be doing?First he must take the actual Phase Three Code and examine it for changes from the draft, then the draft must be thrown away and the annotated Code compared with the Phase Two Code. For this is the legal reality and not what was said or promised in the Phase Three consultative document, which Mr. Heath and his Ministers went to such lengths to explain early last month.
If hon. Members opposite do not much like the way I have presented some of the difficulties, they should know from their business contacts that to make sense of this mass of control over prices, profits, investment, profit margins and so on will he exceptionally difficult for industry.

I would like to get clear whether the right hon. Gentleman is complaining that we gave Parliament an opportunity to discuss the code in draft and that, therefore, a draft code was issued first, or whether he is complaining that, having taken note of the points made in Parliament, we have made some changes. Which is the matter he is complaining about?

I do not like the policy—that the right hon. Gentleman knows. I am not complaining that it was published in draft. What I am saying is that businessmen who themselves want to find out how it works will not be able to use hon. Members in the way in which they would like to be able to do because the same barrier will separate Members of Parliament from the operation.

In effect, the changes made in it from the draft have broadly been concessions to industry, as was made clear by the Financial Times report. Discounts, rebates and sales promotions are exempted; test marketing is exempted for a year—including, presumably, Courtaulds Planet tobacco, which will be exempted for a year from price control; seasonal profits and allowances are exempted; there is relief for low profits of 8 per cent.; and the maximum figure for profit restriction is 10 per cent. On the prices sides, although the thing is immensely complex, the concessions have been made very largely at the request of business.

1023
I come now to judging the policy by results. We have now had it for a year. This is no longer the honeymoon period by any stretch of the imagination. What has happened in the first full year of the counter-inflation policy? The very substantial increases in prices, notably for food, are obvious. For example, food prices have increased overall by 19 per cent., processed food prices by 13 per cent., fresh food prices by 25 per cent., fish prices by 51 per cent., and egg prices by 87 per cent.—all this in a single year. These are the items that enter directly into the cost of living of the people, who have been subjected at the same time to the most rigid wage controls.

I am sure that the right hon. Gentleman would not wish to mislead the country. Will he explain to what extent these increases were due to external factors and by how much the cost of living would have increased if the Government's policy had not been in force?

It is an interesting fact, pointed out on the radio this morning, that the successive Government Papers through the first, second and
1024
third stages of the prices and incomes policy have trebled and even quadrupled in price. I suggest that that could not have been due to world prices.

My hon. Friend has made a point which marks the increase in inflation.

But during this period profits have risen very substantially, notably in the retail trade. In the case of ICI, there is an increase in profits of £670 per worker in the course of a single year.

These figures must be seen against the background of the economic strategy that the Government have been intending to pursue, because there is no doubt that a much less optimistic view becomes apparent when one looks at what business opinion believes will derive from this policy. The Minister today corrected Sir Frank Figgures' statement by saying that he expects that there will be an 11 per cent. increase in wages in the course of the next 12 months, rather than a figure of 13 per cent. But if the right hon. Gentleman looks at the survey of business opinion published yesterday in the Financial Times, he will find that in the engineering industry some 51 per cent. of those whose opinions were sought believe that costs can be held down below 10 per cent.—to between 5 per cent. and 9 per cent. Only 46 per cent. believe that costs will rise above 10 per cent. The figure that the right hon. Gentleman has given today will confirm those who believe that there are serious grounds for anxiety about the acceleration of inflation under this policy.

That is the official Government figure which was given earlier. May I try to set this policy against the broad economic background by which it will be judged, which daily becomes more serious?

There is a balance of payments deficit that could well rise to £1,600–£1,700 million this year if the oil increases are taken into account; an increase in industrial costs of £200 million forecast as a result of the steel price increases which are permitted under the Common Market treaty; a grave deterioration in the terms of trade
1025
announced today for September—the worst since the Korean War—with a 5½ per cent. increase in import prices, partly attributable to the value of the £, which fell 8 per cent. in June and July and depreciated still further in September. Despite what the Secretary of State said this afternoon about a firm control of credit, there has been the biggest increase this year in the four weeks to mid-October of £749 million in bank credit, rising to a total of £12,920 million, much of this, according to Press comment, due to value added tax. The Government have to rethink their policy in the light of these factors which were not available to them at the time when stage 3 was devised.

I turn from prices to wages, and briefly draw attention to some of the facts which the House ought to take into account before deciding whether to pass this Price and Pay Code. Let me take an average wage for an engineering worker. With a continuing rate of inflation of 9 per cent., an average engineering worker with a wife and two children earning £35 per week would get £3.50, plus another 3 X 40p because of inflation over the threshold, making a total of £4.70. But after deductions for income tax and national insurance he would be left with a net increase of £3.06 or 11.1 per cent. on his previous net take-home pay. With a 9 per cent. rate of inflation, this would mean an increase in a worker's real income over the year of only 1.9 per cent., against a projected real growth rate of GNP of 3½ per cent. That is the object of the policy. Furthermore, any worker receiving rent or rate rebates would have even this small margin wiped out by the reduction in his rebates. I ask the House to take the position of the lower paid——

The right hon. Gentleman has given an example of an engineering worker who might benefit from only a 7 per cent. increase under phase 3. What he omitted to mention is the average expected increase of 11 per cent. So if we add the extra 4 per cent. to the figure he has given us, his own figures show an increase in the real standard of living of the average worker of 5 per cent. in the year, and that is surely fair?

The hon. Gentleman did not listen. I shall repeat the passage. After
1026
deductions for income tax and national insurance, he would be left with a net increase of only £3.06 or 11.1 per cent. on his previous net take-home pay of £27.65. With a 9 per cent. rate of inflation, his increase in real income would be only 1.9 per cent. compared with a 3½ per cent. growth in national income. Therefore, he would be denied an increase from the productivity to which he had contributed.

A worker earning £25, a lower-paid worker—and, after all, these people are getting two-thirds of the average national income—with a wife and two, three or four children, will suffer from a fall in his real net income under stage 3.

Some public sector anomalies have also been drawn to our attention, and I should like to consider the case of the civil servants who have written to many hon. Members in different parts of the House—no doubt, my hon. Friend will refer to them tonight. I have one letter from the Branch Secretary of the Society of Civil Servants in my own constituency, which reads:
… My branch wishes me to advise you of the deep resentment felt by Civil Servants due to unacceptable features contained in the Government's Green Paper now the subject of consultation in the House of Commons.
The letter goes on to say:
In all the circumstances your Civil Service Constituents sincerely hope that during the discussion on the Green Paper you will please consider the plea for fair play and support (1) retrospection at least to 1.4.73. (2) no staging for Higher Grades.
To take another example, the members of the Ministry of Defence Police Federation—not a very large body of men—were promised an evaluation of their work in comparison with other police work, because they were getting only 85 per cent. of other police pay. But because of a delay of a month in the report of the evaluation, the Government broke their solemn pledge to backdate the agreement to 1st September 1972.

Then there is the case of the Post Office clerical officers who are now outside the Civil Service structure. They are getting 1.1 per cent. below what they would have had if they had remained within the Civil Service, and that fact is the cause of a very great deal of discontent.

In the case of the Electrical Power Engineers Association, which my hon.
1027
Friend the Member for Bristol, Central (Mr. Palmer) will no doubt raise if he catches your eye, Mr. Speaker, the Minister gave a quite clear pledge on 27th February that its members' position would be dealt with by the Pay Board, but it now appears that it will not. If there is a disturbance in power supplies this winter, which The Times implied could be even more serious than the disturbance during the miners' strike, it will derive from the failure of the right hon. Gentleman to live up to his pledge. The Electrical Power Engineers Association has a right to expect the Minister to speak the truth when he answers a question from my hon. Friend the Member for Bristol, Central.

I turn now to the London crisis, the figures for which have been quoted many times in the House. We are short of 2,000 London transport workers and of 5,000 Metropolitan police, and the London schools alone lost 17 per cent. of their teachers in a year. What the right hon. Gentleman said—and I shall study his words with great care—is that we have to get used to this sort of problem as part of the policy which the Government intend to pursue, but that is not an acceptable proposal.

Finally, I want to present this problem in its broader context, because it is not possible for the House to pass this Price and Pay Code simply on the basis of a study of its narrow mechanics. The fact is that this is a part of a policy which is essential to the Government's whole strategy, which will not meet the needs of the community, will be unfair to huge sections of the community, will deny the rights of trade unions to bar-gain collectively and the rights of Members of Parliament to safeguard the interests of their constituents, will impose hardship on those paying higher rents, is coupled with an unfair policy of taxation and with a neglect of the needs of pensioners, and is failing to meet the requirements which should be imposed on any Government to look after those whom they are elected to serve.

In voting against the Price and Pay Code today we are expressing our lack of confidence in the Government and the Ministers responsible, and as the crisis deepens the total inadequacy of this
1028
policy will progressively become apparent to more and more people.

We have seen in this House the right hon. Member for Bristol, South-East (Mr. Benn) playing many rôles—"Tony, the man of the people", "Anthony, the poor man's best friend. "Today we see him in another rôle, as the person who wants to make the British business man's life simpler. I think I have news for him. He claims to talk to a lot of business men. So do I, and I have heard him described in all sorts of ways but never in that way.

The right hon. Gentleman quoted from The Times and said that phase 3 would be very complicated and, indeed, impossible for businessmen to understand. I could not help thinking of another quotation from The Times of 6th September. This may be something of a disappointment to him. The quotation is:
That has been due in the first place to the success of the prices and incomes policy. During the same twelve months that import prices rose by 32 per cent. the cost of living index has risen by only 9.4 per cent. It is very natural that people should resent any increase in prices, particularly any increase which comes near to the 10 per cent. level. Yet in judging the results of the incomes policy and the need for an incomes policy the British public must recognise what has really happened.
The right hon. Gentleman quoted from a short sentence in The Times, saying that life was going to be a little more complicated for businessmen. All I can tell him is that the British businessman backs the Government entirely in their fight against inflation. If as a result life becomes a little more complicated, the British businessman is quite prepared to put up with that.

The hon. Gentleman apparently speaks with some authority on the subject of the British businessman. Are we to take him to mean that the British businessman has become reconciled to a permanent prices and incomes policy and that he welcomes it?

I do not think the hon. Gentleman can draw any conclusion of that kind from my remarks. One of
1029
the problems is that the Opposition love to exaggerate. I did not say anything which the hon. Gentleman could possibly construe in that way. Neither has anybody on this side of the House done so. No British businessman is under any illusion—[Interruption] Why does not the hon. Member for Feltham (Mr. Russell Kerr) occasionally make a speech instead of sitting there bellowing?

When the Prime Minister introduced the debate on this policy a few days ago he mentioned three objectives which the Government had in mind and which the Government have consistently sought. One was economic expansion; the second was to contain inflation; and the third was to help the lower paid. I hope the House will not hold it against me if for a few moments, instead of wasting time on whether some document which turned out to be of very little interest to anyone was here or not, I tried to talk about those objectives, whether they are worth while and whether the policy which we are attempting to further in this document is working or has a chance of working.

I do not think any of us would disagree with the objectives. We should all be ashamed of the yah-booing, the yelling and screaming which have characterised the behaviour of hon. Members opposite when we have discussed inflation, a subject of vital concern to this country. Listening to them, one would think that inflation was the invention of the British Government, and was particularly a British complaint. I have just returned with my hon. Friend the Member for Bridgwater (Mr. Tom King) from Canada. One of the most surprising discoveries I made was when I addressed 500 Canadian housewives in Winnipeg, one of the great grain capitals of the world, who asked me to speak about the battle against rising prices. In one of the great grain centres of the world at this moment bread is subsidised because the Canadian housewife has learned the lesson which we are all learning, and that is that we all pay world prices unless we subsidise those prices.

Let us once and for all, in the framework of this debate, talk about inflation as a world problem and not as something which the Government have been seeking to impose. The problem is world wide and must be recognised as such. All we can do as a Government is to seek
1030
not to impose on ourselves problems of our own creation in addition to the problems which the world is imposing on us. Anybody looking at the world situation—and one cannot discuss this policy except in the context of world terms, although we all know that the hon. Member for West Ham, North (Mr. Arthur Lewis) believes that the world begins and ends at West Ham, North, and the height of the hon. Gentleman's ambition is some inflammatory headline in his local newspaper——

On a point of order, Mr. Deputy Speaker. If an hon. Member is specifically, intentionally and pointedly referred to, and the hon. Member who has referred to him is asked to give way, is it not the usual custom for him to give way? Am I to assume that, although the hon. Gentleman has given way, he now denies that he did give way?

I do not think there is any doubt about what happened. I think the hon. Member for West Ham, North (Mr. Arthur Lewis) would like the hon. Member for Enfield, West (Mr. Parkinson) to give way, but I do not think that the hon. Member had, in fact, given way. In any case, who gives way to whom is not a matter for the Chair.

Thank you, Mr. Deputy Speaker. I may not have been here very long, but I know that when Mr. Deputy Speaker stands up I should sit down, and that is why, in fact, I did sit down.

If I may continue, I claimed earlier in my speech that phases 1 and 2 had worked. I did not say they had worked competely—nobody but a fool would say that—but in a time when world prices are rocketing faster than they have done for 25 years——

That only proves how little the hon. Gentleman understands this subject. At a time when we have a world prices crisis we happen to have in existence the machinery which enables us to contain our own domestic input to our problems. When I listen to hon. Members opposite, and to one or two on this side of the House, I am reminded of an incident when I went to a rugby match a few years ago. One of the teams was awarded a penalty on the wrong side of the half way line, and a full-back came up to take it. A spectator behind me said what an arrogant and stupid waste of time it was. The full back, to this man's disappointment, kicked the ball between the posts and scored. I turned round and said to the man behind me "What do you say now?" He replied "I still say he should not have taken the kick." Hon. Members opposite remind me of that. One of the problems for hon. Members opposite about this policy is that, in spite of their yells and disappointments, it has made a contribution, and a very important contribution, at a very difficult time for our country.

In my view, phase 3 is equally and vitally important. I do not see as a criticism of the policy the allegation put forward by the right hon. Member for Bristol, South-East that it is aimed only at containing inflation. At a time of fast-rising prices and world inflation, to contain is an achievement and in my view a necessary first step towards the reduction which is the ultimate objective. If in Social-Democratic Germany, in Labour-controlled Australia, in a fairly Right-wing controlled America and in Canada there is a common inflation problem, we should not waste our time arguing about whether there is a world inflation problem. We should try to concentrate all our efforts on uniting the nation and meeting that problem, not making it worse than it needs to be.

I get no pleasure from having to say that I listened to the right hon. Gentleman again today playing his usual game of backing every wage claim down the line—anything goes. I cannot help feeling that he cannot have at heart the best interests of the people he claims to speak for.

The hon. Member must give way. He has attacked my right hon. Friend who, unfortunately, cannot be present. Will the hon. Member say what was happening to all these noble aspirations to unite the nation behind a policy in 1966, 1967 and 1968? What did the Conservative Party then think about the best interests of the British people?

I should like to ask the hon. Member a question in return. When the Leader of the Opposition fell out of his dinghy into the water did the hon. Member for Birmingham, All Saints (Mr. Brian Walden) think he should have spent his time rationalising on the fact that it was impossible for anybody as clever as him to fall out of the dinghy or did he think he should try to save himself? The Leader of the Opposition had no doubt about it. He put survival first, and that is what we as a nation are now facing. This is not a nice Oxford Union debating point about whether we are to deal with the problem or not. We are talking about the survival of our country and means that might be taken to aid it. The sooner we stop treating it as a bit of a joke the better.

Perhaps I may now turn to the critics on my side of the House. I am pleased to see my hon. Friend the Member for Oswestry (Mr. Biffen) present. I intend to refer to the last paragraph of the speech he made on Monday. He said:
If there is to be a reduction in the going rate of inflation it can only proceed if the public are prepared for and are told about the transient but certainly real inconveniences and hardships that will arise. It is a myth to suppose that there are painless cures to inflation."—[OFFICIAL REPORT, 5th November 1973; Vol. 863, c. 701.]
I suggest to my hon. Friend and to one or two of my other hon. Friends that this is possibly the most dangerous myth of all. They say that it is no good pretending that there is a simple solution to our
1033
problems, and then they go on to talk about a solution which is simplistic to a degree and use words like "transient" and "temporary" and "inconvenience" and give the impression that a policy which is aimed at a strong tightening up of the money supply will produce a short sharp answer. The word "temporary" and the word "transient" are always included in the implication of unemployment which my hon. Friend in his normally honourable fashion is prepared to accept as one of the outcomes of what he is seeking. I suggest that he and his hon. Friends have no grounds for claiming that the hardship would be transient. A policy of the kind he and his hon. Friends are suggesting could produce severe and lasting damage to our economy, and I do not think they can talk in terms of "transient', "temporary" and "inconvenience" and then pretend that what the Government are doing in phases 1, 2 and 3 is a myth and a simple approach to a complicated problem.

I suggest that theirs is the simple and simplistic approach. I suggest that in taking it they are allying themselves with the Opposition, who seek to mislead the country into believing that there is a simple answer and that the way to approach our problems is to resent them. The Opposition try to pin the blame on the property speculator or the person who is doing very well out of the system, and they imply that there is a simple short sharp answer. In my view, there is not.

I do not believe that the debate will be enhanced by accusations or counter-accusations about who is propounding a simplistic policy. Does my hon. Friend believe that a reduction in the rate of inflation, no matter how it is achieved, whether by increasing direct taxation, as I was suggesting, or by the statutory control of prices and incomes, cannot but bring transient economic difficulties, including a temporary rise in unemployment?

I simply do not know and I do not think that my hon. Friend knows either. At the moment we are operating in a world in which it is foolish to pretend we are in control. The right hon. Member for Bristol, South-East said that in the last two or three weeks factors had arisen which made it necessary to
1034
amend the Government's policy. Yet earlier he was asking why the Government were not sticking to what they said three years ago. There is no point in pretending that any Government can set out in their General Election manifesto a programme which is unalterable.

May I invite the hon. Member for West Ham, North to sit down and plan his own life for the next 12 months? May I join him in 12 months to find out just where he went wrong and what he did to deal with the problems which arose? Situations will inevitably have arisen which he did not anticipate and he will have to modify his plans and deal with those new situations.

I say to my hon. Friend the Member for Oswestry that I do not know the answer to his question, and I do not think that he knows it either. Too often in this House we seek to suggest that we know the answers. There are no grounds for talking about "temporary" and "transient" in relation to a policy which can produce savage and long-lasting damage. By adopting this approach my hon. Friend is unwittingly joining the Opposition in clouding the issue at a most important time. At this moment there is no place in our country for people who seek to profit by creating misundertanding, by creating alarm and by creating bitterness and division.

No fair-minded person can deny that the results of phases 1 and 2 helped towards attaining the three objectives which my right hon. Friend the Prime Minister set out in his speech a few days ago. No fair-minded person can deny that the motive behind this policy is to ensure that we continue further down the road towards attaining these three objectives.

When the hon. Member for Enfield, West (Mr. Parkinson) began his speech, he referred to the "yah-booing" that occurred in the House during the course of the speeches from the Front Benches. He referred in particular to the noise made
1035
from the Opposition side of the House. The hon. Gentleman was quite right when he said that he had not been a Member for very long. Had he been a Member during 1966, 1967 and 1968 he would have remembered the yah-booing that came from the Opposition side of the House in particular during that period.

The hon. Gentleman will know that I do not approve of it. Sometimes, unwittingly or unfortunately, I have indulged in it. But, on reflection, it is not a very good thing for the House. However, that is not the point. The point I was making is that the same sort of attacks were being made, and much more fiercely, by the then Opposition. It was as a result of those attacks on the Labour Government that firm pledges were given to the electorate by the Conservative Party that in no circumstances would there be a policy of wage control, because that had been an utter and complete disaster.

I was not in favour of the statutory prices and incomes policy which my right hon. Friends introduced at that time. But the important thing is that they did not make a pledge to the country that in no circumstances would they introduce such a policy, and that is precisely what the present Government have done.

I agree with the hon. Member for Enfield, West that there are no simple solutions to the problem of inflation. Anyone who suggests that there are easy and simple answers is not living in the real world. I go a little further. We should note that the hon. Gentleman said that throughout the countries of the western world and in Australia, and so on, the problem of inflation was being faced by all Governments. That is true. I would not expect the hon. Gentleman to agree with me, but I think that inflation is a problem of the capitalist system. It is endemic in the capitalist system and cannot be avoided. This system of society is striving constantly for profit as its main motive. Obviously there will be a constant demand for higher prices, which means inflation, and workers will then demand higher wages in order to keep up with the higher prices. This in turn has the effect of increasing prices. There is no
1036
answer to the problem. It can only be held back for a period in the short term. There is no answer as long as the capitalist system exists in any part of the world. We must remember that when discussing this question theoretically. We must go much further and deeper than we often have gone in the House when talking about this subject. We need to go much more deeply into the whole question of inflation, and we should take that on board when talking in these terms.

My right hon. Friend the Member for Bristol, South-East (Mr. Benn) talked about the approvals of price increases which are not now to be published by the Price Commission. For my sins, I attended the Conservative Party conference. I listened to the conference from the floor of the conference hall. I hope that everyone read my article about it with great interest. If they did not, they ought to have done so. I hope that my lion. Friend the Member for Birmingham, All Saints (Mr. Brian Walden) will tell my right hon. Friend the Member for Bristol, South-East, when he returns from the meeting that he is attending, that I heard it said, from the floor of the Conservative Party conference, and then accepted by the platform, that it was a terrible thing that the Price Commission should continue to announce all the price increases, because it was doing untold harm to the Government, and that it would be far better if this was not accepted by the platform because it was doing great harm to the Government. I am not surprised that from now on approvals of price increases will not be made publicly. It is a deliberate attempt to hide the reality of what is happening.

Before my hon. Friend leaves his dramatic revelations about the Conservative Party conference, will he say what he thought of the Chancellor of the Exchequer's moving declaration to that conference about the patriotism and good sense of the British trade union movement?

The Government have learned a great deal in the past three years. They are continuing to learn about the trade union movement. All of us in the House can remember that prior to the introduction of this part of the Government's policy, the third stage of which we are now discussing, we were
1037
told that the whole problem was the demand of workers for higher wages and that this was the basic cause of inflation. Then this policy was put into operation. But there is continuing inflation. We are now told that it was all due to world prices, or due to the weather. Every conceivable argument has been advanced. But the Government have learned that it is not all due to the trade unions and that they must live with the trade unions. The Government have learned that it would be very wise to listen a little more carefully to what the trade unions say about policies for dealing with inflation.

I should like, first, to deal with the unfairness of the Government's policy and, secondly, to comment on the situation in the construction industry.

Regarding the unfairness of the Government's policy, in the consultative document the Government constantly say that the proposals formulated are both fair and flexible. We heard it again today. I get very worried whenever I hear the present Government use the term "fair" because I think of the "fair" policy in relation to industrial relations. At present the Amalgamated Union of Engineering Workers would need a great deal of convincing that the Government's policy is fair in relation to the Industrial Relations Act. Then there was the fair rents legislation. The overwhelming majority of council tenants, and now private tenants, who are having their rents increased as a result of the fair rents policy would need a great deal of convincing that it was fair. I am not talking about those who have had reductions in their rents. The word "fair" usually prefaces a wholesale attack on ordinary people. They get clobbered whenever that word is used by this Conservative Government.

In his speech at Lancaster House, the Prime Minister said that the Government had accepted the report of the Pay Board on anomalies created by the standstill. On the surface, that looks good, but if one looks below the surface one finds that the reality of that acceptance is something different. My right hon. Friend the Member for Bristol, South-East referred to the civil servants, who have been the most glaring example of a section of workers who have been the victims of the pay freeze. The Pay Board accepted that
1038
an anomaly existed in respect of civil servants. But, instead of civil servants receiving a pay increase retrospective to 1st April of this year, they will receive their increase only from the start of the operation of phase 3, a few days ago. That is a real loss of income for civil servants, a loss they will never make up. The fact that the Government are now boasting that they are dealing with the pensions side in no way compensates for the loss of income.

I am sure that my hon. Friend wants to be correct about this but I think he has inadvertently slipped up. When he refers to the Civil Service I think he should say the lower-paid or ordinarily-paid civil servants, because the top civil servants who drew up this policy doubled their increases in salary to look after themselves just before phase 1. They have been all right.

My hon. Friend is absolutely right. I do not move in the highest echelons of the top Civil Service. I meet the ordinary levels of civil servant in the various Government offices, and they certainly tell me what the position is. They explain very clearly their deep sense of resentment as a result of what has happened.

We also have those workers who were civil servants before the establishment of the General Post Office as a public corporation. These people are now suffering from a double anomaly because there is an argument about whether they should still be considered as civil servants and receive a civil servant's pay. They will not get their increase until the civil servants; indeed they will not get it at all because of this argument.

My hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) is often regarded as a loner who puts things up. People do not take much notice of him sometimes, but they ought to take notice of his Motion No. 425 on the Order Paper. In that he clearly points out that some people, chairmen of all sorts of nationalised boards and so on, are receiving payment retrospective to 1st April. That will not apply to the lower ranks in the Civil Service. If it is good enough for the chairmen of nationalised boards to get up to £250 a year increase, what about the lower-paid civil servants? I
1039
ask the Government, even at this late hour, to look again at these two categories of worker. The Staff Side of the National Whitley Council has made a plea about this which ought to be heeded.

There is an argument by those who support the Government's policy that dividends are being controlled. What we must understand is that once dividend restraint is removed, as it will be ultimately, there will be a distribution of money to shareholders. That does not apply to workers in factories and offices. There is no question but that this is not a fair policy, that it is not even-handed and that it does not apply equally to all sections of the community. Primarily it is a policy concerned to hold back wages while other sections are able to make advances or, if remuneration for these other sections is held back for the time being, they know that in the last analysis they will still get the lion's share and suffer nothing as a result of the policy.

I would like to quote a Trades Union Congress statement on this dated 15th October. It says:
Company profits have shown a steep upward trend in the past two years and profits per unit of output have been growing faster than wages per unit of output… What this means is what has happened previously—big increases in payments to shareholders when dividend restrictions are eased.
If the Government were serious about an even-handed policy, applying to all sections of the community, they would withdraw the concessions which came into operation earlier this year giving £300 million a year to surtax-payers——

I do not want to be discourteous but I have been going on long enough.

I want to comment about the statement that £40 a week is the average income on the basis of wages and salaries. It appears as if our workers have suddenly become well off, are doing extremely well and buying Jaguars to park outside their council houses. The general impression is of an affluent society. Let us have a look at that. The average income for manual workers, which does not include the higher salaried section, is £37 a week. That includes the total income with over-time payments and all sorts of other addi-
1040
tional payments. It is interesting to note that hospital porters and kitchen staff receive an average of £29 a week on the basis of working all sorts of hours. Dustmen receive £31 for a 45-hour week. The lowest income for any section of worker is that paid to the agricultural workers, who receive £27 for a 47-hour week.

Then we come to women workers. The consultative document says:
We shall allow further progress towards equal pay for women.
The norm for women workers is £22 for a 40-hour week. A woman laundry worker receives £15 for a 40-hour week and an assistant in the retail trade averages £16 a week, while a dressmaker gets the grand sum of £18. It is pretty obvious that we have a long way to go before we can talk about women receiving genuinely equal pay.

I want to make a brief statement on the construction industry. This has been dealt with in the consultative document which is referred to in the order. The industry is in a state of absolute chaos. Anyone who knows anything about the industry knows that this is true. The Government think that the answer is to cut back on hospitals, schools, health centres, fire stations—£100 million worth of public expenditure—but this does not solve the problem in the building industry. The real cancer in the building industry, which is leading to higher prices and cannot be dealt with under the order, is that of self-employment. That is the key. The "lump" is the problem in the building industry.

It does not matter what Government we have; they will ultimately have to come round to the fact that we shall need legislation to eliminate self-employment and the "lump" from the building industry. That is something which they will have to face, because it cuts right through any sort of incomes policy about which the Government are talking. It cuts through organised trade union negotiations, too.

If the Government truly want to deal with inflation, they should listen more carefully to the point of view of the Trades Union Congress. They should get rid of the Industrial Relations Act. They should ensure that pensioners are dealt with properly, and not in the way they have suggested, because it does not
1041
solve the problem. They should endeavour to bring in controls as far as possible. I do not suggest rigid control of prices—I have never believed that to be possible in our type of society—but there should be greater control of prices. In the last analysis, we must be prepared to extend and expand economic control. Only by the expansion of that control, and by eventual public ownership, shall we be able to deal with the problems of inflation.

It is always a pleasure to follow the hon. Member for Liverpool, Walton (Mr. Heffer), with whom I have had many agreeable discussions in the past, both in public and in private. The hon. Gentleman has introduced a somewhat emollient note into our proceedings, and that is a welcome change.

The right hon. Member for Bristol, South-East (Mr. Benn) made a disgraceful speech. He described my right hon. Friend's speech as the most disgraceful presentation of Government policy that he had ever heard. In my view, some of the goings-on earlier this afternoon on bogus points of order—[Interruption.] There may be some historical precedents, but today the quality of debate and spurious points of order not only were discourteous but, to a large extent, invalidated the whole democratic system on which the House of Commons is meant to work. I should be sad to see repetitions of that type of behaviour. I thought it sad that it happened, and a repetition of it might well be the end of parliamentary Government in this country, on which both sides of the House ultimately depend.

The hon. Gentleman may have a good case on that point, but he should not try to launch an attack against a Minister by attacking the Chair through a spurious point of order. Hon. Members on both sides clearly heard this afternoon—not once, but constantly—spurious points of order ruining what should have been an intelligent debate.

1042
I want to examine in detail the arithmetic produced by my right hon. Friend on the likely rise in earnings over the next 12 months. In the consultative document the Government estimated that the increase would be between 10 per cent. and 11 per cent. They did not say 11 per cent. Today my right hon. Friend departed from that figure of between 10 per cent. and 11 per cent. and said that he expected the increase in earnings over the next 12 months to be 11 per cent. That is slightly higher than earlier figures.

My hon. Friend was not in the House when my right hon. Friend the Secretary of State corrected his earlier remark and said that the figure was between 10 per cent. and 11 per cent.—that is 2 per cent. on the 8 per cent. to 9 per cent. set out in the White Paper.

I was trying to help my right hon. Friend. We have now gone back a step. I understand, therefore, that the Government now believe that the likely increase in earnings over the next 12 months will be between 10 per cent and 11 per cent.

On the other hand, it can be no coincidence that on the day that the details of phase 3 were published several national newspapers clearly stated that the Treasury expected the increase to be more than 11 per cent. Therefore, already there is a gap of about ¾ per cent. or 1 per cent.

Going back over a period of years, both the hon Gentleman's party and mine share responsibility for the actions of the hard-working and determined men from the Treasury and other Government Departments.

1043
Inspired newspaper commentators have managed to arrive at a figure of over 11 per cent. although my right hon. Friends are still sticking to their 10 per cent. plus. It has been explained why the figures of Sir Frank Figgures—who is becoming a new Lord Rothschild—were wrong. My right hon. Friends did what I considered to be a fairly adequate papering-over operation, trying to bridge the gap between 11 per cent. and 13 per cent.

It would be interesting to know in greater detail the extent to which Sir Frank Figgures's precise figures differ from those of the Treasury and the Department of Employment. It cannot be without significance that the Confederation of British Industry has come up with a figure of about 13 per cent. and that the difference between that figure, which the CBI is prepared to stand by, and that which until today Sir Frank Figgures was also prepared to stand by, and the Government Departments' 11 per cent. is due to a number of items not being considered in detail.

If one considers the consultative document, one sees that the flexibility margin is accounted for; although anomalies are acounted for, no precise figure is given, but it appears to be about ½ per cent.; equal pay is acounted for, and that is also perhaps ½ per cent.; and overtime, I suppose, will be about 1 per cent. All of that totals about 11 per cent., though my right hon. Friends might say that it was really 10½ per cent.

In the consultative document no estimate is made for unsocial hours—say ½ per cent.—or for the London allowance—another ½ per cent. Nothing is estimated for bank holidays, which we know to be ½ per cent. Inevitably efficiency payments, which were intended to be self-financing, create an element of seepage through their not being self-financing, and, therefore, another ½ per cent. should be allowed for them.

All these little bits and pieces, to which my right hon. Friends have not given their entire attention, will increase the actual figure from 11 per cent., or 10 per cent. plus, to about 13 per cent.

I entirely agree, but I am trying to take a national average, and, taking the country as a whole, the average earnings for each person will probably be increased by ½ per cent. as a result of that feature. So we get this figure of 13 per cent.

My right hon. Friend made a brave attempt to reconcile the pronouncements of Sir Frank Figgures and the position he still maintains. As a number of my hon. and right hon. Friends have pointed out, we are legislating for a 13 per cent. increase in earnings. We have heard from the lips of my right hon. Friend the Chancellor of the Exchequer that production in the course of the next 12 months will increase by only 3½ per cent. Productivity will go up by less than that, because one must account for the population increase. Therefore, productivity is likely to rise by about 2½ per cent.

Thus, if the average man increases his production by 2½ per cent., and his average earnings rise by 13 per cent., inevitably inflation will continue at 10½ per cent. This means that, long before the 12-month period is up, the threshold agreements will be triggered off. Therefore, by this time next year earnings may well be 16 per cent. higher. This causes me great anguish, but Labour Members should be delighted. They have been told that earnings will rise by only 10 per cent., but in money terms earnings under phase 3, which is intended to stop inflation, will allow inflation to continue. The average person will be making more money and that will feed inflation again.

The hon. Member for Walton said that shareholders always won through. That might not be so if there were a Labour Government in a couple of years' time. One of the ironies of the situation in the past three years of Conservative Government is that dividends have lost relatively more ground than they did in the full six years of Labour Government. The slice of the cake taken by dividends, the share of gross national product, in 1964 was 5.1 per cent. When the Conservative Party came to power in 1970, it was 3.7 per cent.; the cake had shrunk by one-quarter.

By 1974, under the rules of phase 3, the slice of the cake taken by dividends
1045
will have shrunk to 2.5 per cent., which is a drop of one-third. Under the Labour Government the dividend slice fell by one-quarter; under the Conservative Government it will have fallen by one-third, that is, by more than it did under the Labour Government and in a much shorter time.

If the hon. Gentleman were still here, he might agree that, if he is against dividends, the best way of making sure that dividends take a smaller slice of the national cake is by having the Conservative Party in power and not the Labour Party.

I should be much happier if stage 3 were stricter. Clearly, Labour Members would not agree and many of my hon. Friends would not agree. I am not convinced that stage 3 is the best system we have, but we want to see that it works. I should like to see stage 3 not with a 13 per cent. package but with a much smaller package. I think that 8 per cent. is the sort of figure that one should have if one genuinely wishes to reduce inflation as opposed to containing it. I should like to see not only the total amount changed but the mix changed—in other words, that the automatic 7 or 8 per cent. which, apparently, anybody in this country is to get, however idle he is, should be minimal, that the extra amounts for flexibility, for equal pay or for anomalies etc., should take the lion's share of what the nation can afford in the next 12 months.

In my own constituency, the china clay industry is being held way behind any sort of national average, and it seems to me that the workers in the china clay industry are being held back quite unfairly. The anomalies into which they have been running are, apparently, not allowed to be catered for because one is not allowed to relate one's anomalies problem to any sort of index; it has to be related to another industry, and there is no comparable industry to china clay.

I implore my right hon. Friends to look at genuine efficiency payments. I recog-
1046
nise that the efficiency payments system can be used as a dodge to pay people more money for the same amount of work. In the china clay industry, however, there already is a genuine efficiency system. It is one of the few industries in this country in which no overtime is paid at all—and we all know that overtime is a fiddle.

If management is obliged to pay certain increases dependent upon improved results—which have now come through in the china clay industry—does not this put the management in the position of having to break its word with its workers? Is not that the situation, and could not that be treated as an anomaly if there is this obligation?

I entirely agree with my hon. Friend, and I hope that my right hon. Friend will help the management of English China Clays to get out of its present difficult position, in which it is actually being sued by its employees for breach of contract. It cannot be argued that the company has put itself into this position. I am glad to see the hon. Member for Cornwall, North (Mr. Pardoe) in his place, as he has quite a few china clay workers in his constituency.

My right hon. Friend the Chancellor of the Exchequer will, apparently, stand firmly against any increase in taxation at this stage of the country's economic history. The right hon. Member for Leeds, East (Mr. Healey) is prepared to advocate increased taxation, but he will not admit to the British people that that would involve a decrease in their consuming power. I, on the other hand, would welcome an increase in taxation precisely because it would diminish the average Englishman's capacity to consume.

I am sure that it will be possible in a general sense, if not in a particular sense, to follow some of the remarks of the hon. Member for Truro (Mr. Dixon) in his interesting speech.

I want to return the House to the fact that tonight we are discussing a specific motion, namely, to approve the Counter-Inflation Price and Pay Code (No. 2) Order. It seems to me, therefore, that
1047
if the House is to approve this pay code it has a right to know how it works. There has been a tendency for Conservative Members to say that, because the intentions of a policy are good, the means by which it is carried out must automatically be good. That is not the case. Often, if the means by which a policy is carried out are not good, that defeats in the long run the good ends of the policy.

I propose, therefore, to give an account of the pay situation in the electricity supply industry—with which I can claim to be familiar, as the House knows—and the special position of the technical staffs.

For the first time in their history—they have negotiated for their salaries collectively for more than 50 years—the technical staffs are enaged in industrial action. The decision not to carry out duties beyond their normal working hours—they will do the work, but only as they judge, if the system is safe, in normal working hours and not outside them—is, let me emphasise, not an action against the electricity boards. The electricity boards conceded the out-of-hours claim 11 months ago and the electricity boards, as I am sure the hon. Gentleman knows, the Electricity Council and the CEGB have asked the Government if they may make these payments. The electricity boards have said that in their opinion these special payments are outside the normal span of increases under the pay policy.

It is not in any sense an action against the employer, nor is it an action for overtime payment. The technical staffs accept that normally they have had a 24-hour responsibility for the maintenance of electricity supplies. Although they are good trade unionists and have never done anyone else's work during some past industrial disputes, not affecting them, they have taken emergency actions—dislocation of load and so on—so that essential supply will be maintained.

Therefore, this present action is not an action against the employers, the electricity boards, or the consumers, though inevitably they are bound to suffer in the circumstances. It is a protest against the absurdities and injustices of the pay code, which we are asked to approve tonight.

1048
The technical staff did not wish to be placed in this position, but the pay policy has grown round them like a spider's web and they are now entangled in its meshes. The firemen by some method seem to have broken out—I congratulate them—but so far the technical staffs have not succeeded. I am told that under stage 3 there is no possibility of their breaking out on the present drafting of the proposals.

The new arrangements for improved stand-by and call-out payments have been agreed to through the national joint board for collective bargaining for technical staffs of electricity supply, which has existed since 1920. I shall not give the figures now as to do so would take too long, but, if they are all made, they simply restore the purchasing power of these payments as they stood in about 1968, so they are not extravagant. They were agreed in mid-December last year, shortly after the trap-door of the Government's stage 1 policy closed, on 6th November. Before that date—this is very important—the industrial staffs who work under the general supervision and direction of the technical staffs received a pay increase across the board, thus escaping the standstill of stage 1, but the technical staffs were caught in the trap.

I do not criticise the payments made to the industrial staff—good luck to them; they needed every penny—but the important point is that the arbitrary intervention of a date in the calendar—a date not based on reason, logic or calculation—has further telescoped in electricity supply the already narrowing differentials in the same industry where the work of sections of the engineering staff, manual and supervisory interlocks at every point.

Those affected did not believe at first that it was the intention that a policy, good or had, for pay control by a Government claiming to be anxious to get general assent should not be sufficiently flexible to deal with their situation.

The issue was raised sharply with the electricity boards who expressed sympathy but bluntly put the blame on Ministers. The matter was then equally sharply raised with Ministers, as the Secretary of State for Employment is aware, and they expressed interest but said that it was a matter for the Pay Board and the further stages of the pay policy. In
1049
addition, as those who were present will recall, I raised the question on 27th February—and similar questions on other industries—at the Report stage of the Counter-Inflation Bill. I put down two probing amendments which I later withdrew.

The right hon. Gentleman has been informed that I intended to raise this question and, although I do not want to be long, it is important that I quote his words. Referring to me he said:
The hon. Member referred to a problem that has arisen in his and in one or two other industries, including the Post Office, where different parts of the same industry have different negotiating dates. That has led to one section being caught by the standstill and another section not being caught. It is precisely to deal with these sorts of anomalies that the Pay Board will give them early consideration during the course of phase 3, so that they can be rectified in the course of the next pay rise.
That to me is a plain, simple, straight-forward, easily understood undertaking.

In order that there should be no doubt, intervened at that point and asked:
Will the Secretary of State therefore give me an assurance that in cases like this, if it were found that in terms of real standards the incomes of one group compared with another had been reduced it would be possible for the Pay Board retrospectively to put the situation right?
The Secretary of State for Employment replied:
In applying the policies of stage 2 the Pay Board will be bound by whatever are the terms of the code, after the consultations and debate have taken place on this document and the House has debated the draft code.… I can assure the hon. Gentleman that I am aware of the problem that exists in his industry and one or two others.
To summarise, I understand this to mean that this issue and others like it will be put to the Pay Board, that the problem will be dealt with at later stages of the policy and that the worsened relativities regarding pay of the technical staff in electricity supply will soon be put right.

I am sure that the hon. Gentleman would not in any way intend to mislead the House. He correctly quoted my remarks. I said:
…to deal with these sorts of anomalies that the Pay Board will give them early consideration…so that they can be rectified in the course of the next pay rise.
The hon. Gentleman did not regard that as a firm undertaking because he asked me to be more specific and to give him
1050
an assurance. He has just quoted my reply which was:
In applying the policies of stage 2 the PM, Board will be bound by whatever are the terms of the code, after the consultations and debate have taken place on this document and the House has debated the draft code.
But he omitted the following passage which continued:
The Pay Board will take this type of problem into consideration in advising on how to formulate the guidelines for stage 3 which, after consultation and debate in the House, we intend to embody into a code for stage 3."—[OFFICIAL REPORT, 28th February 1973; Vol. 851, c. 1454.]
I believe that makes it perfectly plain that I gave no undertaking whatsoever, other than that the Pay Board would look at all these anomalies which have been created, with a view to putting them right in stage 3. That is precisely what the Pay Board did. None of the other industries concerned has regarded it as a firm undertaking that its specific case would be dealt with.

I should add that the anomaly about which the EPEA presented evidence to the Pay Board was concerned with its pay link with manual workers. It is now taking industrial action about the out-of-hours agreement, which is a separate matter and which has not yet been put to the Pay Board, to see whether an advance is possible.

I just do not understand the right hon. Gentleman. On behalf of the association, I was one of those who gave evidence to the Pay Board. I was before the Pay Board for three hours and the out-of-hours settlement was discussed. Afterwards the association submitted documentation to the Pay Board on the out-of-hours question, all without result, because it was not covered, despite the right hon. Gentleman's assurance, in the anomalies report when it came.

This has been borne out by the correspondence that the EPEA has had with the right hon. Gentleman's Department. This is not the time to quote it, but this is what was written by a senior civil servant for the General Secretary of the EPEA, Mr. John Lyons:
It is plain from this and from the passages that you quote that action on these problems had to be dependent on the Pay Board's advice and on subsequent consultation within
1051
the context of the next stage of the counter-inflation programme. There was no commitment to remedy any specific anomaly.
The parliamentary words are on the record. I think that there was a commitment and that the right hon. Gentleman has broken his pledge.

The Pay Board did not deal with this anomaly, as promised by the Minister, because the Government would not allow it to do so. The Pay Board, whatever ingenuity it may show in argument or dialectical skill it may use in writing, is limited in scope to what the Government decide it should consider.

The Deputy-Chairman of the Pay Board, Mr. Ken Johnson only a week ago in a speech at a conference in London on 31st October 1973, said:
The Board's job will continue to be to implement the Code as it stands, with no more discretion than it has had in Stage 2. I make this point forcibly. I am not at all sure that people have fully understood it during Stage 2. And I want no one to be under any illusions in Stage 3.
In short, the Pay Board is the creature of the Government and in the light of bitter experience many in the trade union movement now understand that. The double talk in which the Minister and members of his Department have indulged is breathtaking in its audacity.

I can say no more than that but quote instead the famous words of Humpty Dumpty in Lewis Carroll's "Alice in Wonderland":
When I use a word it means just what I choose it to mean—neither more nor less.
That perfectly sums up the right hon. Gentleman's position. I do not blame him too much morally because I wish to do him the kindness of saying that he did not know at that time whether he was coming or going. He did not understand the policy and what he was saying, and I am doubtful whether he understands it now.

In an earlier intervention the right hon. Gentleman told me—he is apparently still using the same argument—that the out-of-hours payments could be taken out of the all-round annual increase or across-the-board payments that will be possible in stage 3. These special supervisory duties are often performed in the small hours of the morning with men working under most difficult conditions. Staff may
1052
have to restore supplies over large areas of country or put right breakdowns of plant in monster power stations. It is extremely onerous and difficult work, highly skilled, needing long training and good qualification, and the whole industrial life of the nation depends on its success.

Under the general increases of stage 2, electricity supply technical staff received, on the basis of £1 per week plus 4 per cent., an increase averaging 5.8 per cent. per head. Over the period for which it was calculated there was a 9.8 per cent. price rise. Therefore, in real terms, technical staff gained nothing from that general increase. If the special out-of-hours increase, which affects only a section of the technical staff, although a very important section, had been taken out of the general stage 2 increase—which would have meant that their colleagues paid for it—it would have reduced the general increase by about another 3 per cent. I believe. That means that technical staff would be 6 to 7 per cent. worse off in standard under this Government than they were when the previous round of increases was given. That is my answer to the right hon. Gentleman's facile suggestion.

In these matters, the test of the pudding is in the eating, and the technical staff in electricity supply have found it to have a bitter taste indeed. The whole policy is a bureaucratic muddle which, judging by the continuing rises in prices, is having only the slightest effect on inflation. It is window-dressing, wasting the time of devoted public servants such as Sir Frank Figgures. It is dangerous to the health of the economy. It freezes differentials in a set position at a time when it is important, if industry is to expand and remain competitive, that differentials should move up and down all the time.

I speak as one who has been connected for most of his life with the engineering industry, the workers in which, at every level, contribute by productive effort to the life of the community, management and shop floor alike. My connection has not been with those who live by capital gains and unearned increment. If differentials are frozen in this arbitrary fashion, nothing is added in the long run to the general efficiency of British industry.

1053
I started as I end with the electricity supply industry. The Government's policy has resulted in causing a responsible body of men, who have never, to my knowledge, failed the industry or the country, partially to withdraw their services for the first time in their history. I blame the Government and the foolish pay policy which they are asking us to adopt for that sad state of affairs.

I believe that any fair-minded person will agree that phases 1 and 2 have been more successful than anyone could have hoped, and that any reasonable person who has the interests of the country at heart will hope that the Government will be successful with phase 3 in containing inflation.

I am not a great believer in the control of prices and incomes, and, although it was probably necessary in the situation in which we found ourselves last autumn, I hope that we shall soon be able to discard it. It may not be a very clever analogy to refer to phases 1, 2 and 3 as a bigger and better fire engine designed to put out the flames of inflation, but for my purposes I think it will do. When one is confronted with a fire one must tackle it with any means available, but there are questions to be asked.

Why did the fire get out of control? What is feeding the flames? I hope that the Government will pay more attention than I have so far detected to these two questions.

One of the principal reasons why inflation has got out of control is that we have been using false figures in determining economic policy. We have been getting the unemployment figure wildly wrong. There have never been a million people waiting to work, as I said in March 1972. At that time there were probably no more than a quarter of a million people wanting to work.

The Government are being far too modest in saying that they are tackling the unemployment problem. They have tackled and solved it.

We are confronted not with that problem, but with an intense shortage of labour which is having a serious effect on the Government's policies and on the future growth rate which they have
1054
worked hard to achieve. It is time that we stopped deceiving ourselves about the level of unemployment. From the north of Scotland down to Cornwall and across to East Anglia the papers are full of advertisements of vacancies, and employers are poaching from one another.

I draw my right hon. Friend's attention to an instance of poaching in my county now. The British Sugar Corporation—it may not quite be a nationalised body, but it is near enough one—is advertising for unskilled labour at a minimum wage of £42 per week. I am not complaining about that, but the rate is 66p per hour. Unskilled agricultural workers receive a wage of £19.50, and that represents 46½p per hour. I understand that phase 3 will confine them to an increase of £2.25, if they opt for that, and obviously they will because they are lower paid, giving a total of £21.75. I sincerely hope that a way will be found to upgrade the agricultural worker's wage. It is of vital interest to the country that we should detain sufficient personnel on our farms to maintain full and increasing production.

I want to analyse the unemployment figures. The latest figures for this purpose are those for May of this year, when there were 591,000 so-called unemployed. Of that figure, only 242,000 were drawing unemployment benefit, while 223,000 were drawing supplementary benefits. They had been unemployed for a year, and most of them are unemployable. Such people have always existed, and they probably always will. They are not on the labour market. Included in the remainder of the figure are 126,000 persons who receive no benefit at all. They are mainly retired, professional people, or those with sufficient outside means as not to qualify for supplementary benefit. We should accept that there are now only 242,000 unemployed, and included in that figure there are 93,000 building workers.

Will the hon. Gentleman take into account that in the older industrial areas many of those receiving supplementary benefits do so because at the age of 50 and over
1055
it is almost impossible for them to get another job and not because they are traditionally unemployable? We seem to have a lower and lower success rate for employing industrial workers.

I accept that in certain areas there is difficulty. I do not attempt to deny it, but I am talking of the overall position of the country where we must get to the root of this figure. The point the hon. Member for Pontypridd (Mr. John) raised is affected by the immobility of labour due to our outdated council house system. But that is another matter.

I want to get to the root of the figure of 242,000 people who receive unemployment benefit. That figure includes 93,000 building workers. The hon. Member for Liverpool, Walton (Mr. Heffer) knows all about that. He made an interesting speech three and a half years ago when his party was in power. He knows how many building workers are working and drawing unemployment benefit. It would be wrong to say that there are 93,000 building workers doing it, but certainly there are a considerable number. One should recognise that. [An HON. MEMBER: "Name a few."] That position is not confined to building workers. It goes on right across the board with many other professions involved in working and drawing unemployment benefit.

Since the figure of 591,000 has now dropped to 500,000 it is reasonable to say that there are fewer than 100,000 people in this country genuinely wanting and intending to work. I am convinced that we are making serious mistakes in our main economic calculations.

Even more foolish is our attitude to the number of vacancies. Vacancies in August were 473,000. In round figures there are 500,000 so-called unemployed and 500,000 vacancies. The Department of Employment informs me that it knows only of between 20 and 25 per cent. of vacancies. In other words, it is reasonable to assume that there are 2 million vacancies to be filled.

It is an extremely serious matter because it will be almost impossible far phase 3 to operate properly in a situation where employers are poaching employees from one another. Under those conditions it is impossible to operate phase 3. It is acting more unfairly

1056
to those more responsible sections of the community, the civil servants and so on, who are in a difficult position, as are the people I mentioned earlier, the agricultural workers who, too, are so unfairly held down.

I challenge anybody to disagree with these figures, because nothing is known about them. It means that there are 20 jobs awaiting every person willing to work.

I ask the Government most sincerely urgently to find out more about unemployment. At the moment, they know precious little. I ask them to answer these questions. How many of the so-called unemployed included in the present figures have retired and have no intention of working again? How many are unemployable? How many are part-time workers reclaiming PAYE? This is a very profitable exercise. If one works for nine months of the year and free-wheels for the other 12 weeks one is better off than if one works for the whole 12 months, and one also has the satisfaction of paying no tax. Many people are doing this——

How many included in the 500,000 are Southern Irish citizens each of whom is claiming on one or more insurance card? This should be looked at closely. The White Paper recognised this problem, and the fact that we do not have a clue how many Southern Irish citizens are included in our figures. Last, we should know much more about how many people are fraudulently claiming unemployment benefit yet working.

I beg the Government to think seriously about these matters. It is impossible for any manager to manage properly under these conditions. There is no sense in the Government criticising management while these conditions prevail. It is also impossible for responsible union leaders to keep their wilder members under control in these circumstances. Furthermore, it does not matter whether we are in phase 3 or phase 23: we will not control inflation till we get a reasonable and sensible balance between those who want to work and the vacancies available.

Nothing in the earlier part of this debate, whatever may have happened more recently, has answered those who believe that the present rate of inflation is the most alarming issue facing the whole structure of our society or those who believe that the House is treating inflation with triviality. If points of order could cure inflation, we should have done a grand job today.

Although it is on a statutory instrument, this debate is really about inflation and not about what Sir Frank Figgures said about inflation. Although we are debating this instrument, the code is already way out of date. Whether it would have been effective before the Middle East crisis, before the likely effect of the rise in oil prices, is not something that we need argue about now. The world has moved on and stage 3 is entirely irrelevant to our present problem.

As the Prime Minister made clear at his Press conference, stage 3 is based on a gamble on the terms of trade and commodity prices. It was always an uncertain gamble, but it is now a reckless and irresponsible gamble. Today's Financial Times, reporting the latest rise in import prices for September, shows what has happened to the terms of trade. The Government can no longer have any confidence that the terms of trade will some day, somehow, soon, turn in our favour.

It is not just a question of how oil enters into commodity prices directly. Of course it affects processing, mining, transport and freight—both from the source of production to these shores and within these shores—but it also has an indirect political effect. The lessons that the Arabs have taught the world in the last week will not be lost on the producers of copper, wood and every other commodity.

Those lessons are that commodity producers win out when they flex their muscles. It may not be so easy for COPEC, the copper producers' ring, to deal with the world in quite the way that the oil producers have done, but they will try. Whether they fail or not, there will be an increase in prices in the short term and one cannot say now how long the short term will be. Of course we will not see rises in copper prices of 100 per cent., which is what we have seen in the Last 12 months, but I doubt whether the Gov-
1058
ernment are right now to gamble on a fall in commodity prices within the next 12 months. That is what the whole of stage 3 is based on, so it is out of date. However, since it is all we have, I suppose that we had better deal with one or two points in it.

The details of the price control in the code convince one only that it is futile to try to control prices by this means. One has to deal with profit margins if one is to have any effect on prices. Paragraph 58 on page 15 of the code gives the nub of the problem which the Government face. It refers to percentage margins; they are the villains of the piece.

If one tries to measure profit margins by a percentage in an inflationary situation, inflation is a splendidly profitable agent. If I buy an article at 75p and sell it at 100p, my percentage profit is clearly 33⅓ per cent., but my absolute profit is only 25p. Then inflation takes place. If I buy something now at 100p instead of 75p and maintain my profit margin at 33⅓ per cent., my absolute profit rises, through no increased efficiency on my part, from 25p to 33⅓p.

The hon. Member has fallen into the trap that all schoolboys fall into. He has quoted profit on cost, not profit on return, which is what all traders get. In business, the hon. Member would go broke very rapidly.

We have all heard the hon. Member setting out the difference between profit on cost and profit on return, but he was the one who, in the early stages of this Government's prices and incomes policy, preached to the House how splendidly competitive the High Street was, how marvellously well one could leave the whole problem to the competition between the supermarkets. But let us look at what has happened to supermarket profits. What will the Government do about supermarket profits? They will fine them £400 for refusing to provide the information required for the board to make a judgment. I hope that we will have no more of this nonsense from the hon. Gentleman; his policy of High Street competition has failed utterly.

Profit margins can be effectively controlled not by reference to percentages but only by reference to absolute margins.

Before the hon. Gentleman leaves that point, may I ask whether, from his experience on the London Metal Exchange, he would apply the same philosophy there—that it must be an absolute and unchanged amount, not related to costs?

For individual firms—indeed. If one is trying to police a price policy, one has to apply any regulations that one is applying by absolute margins—not on every transaction, of course, but at the end of the period. As the hon. Gentleman knows, in any event I would not fine even the members of the London Metal Exchange for making too large profits; I would simply tax them on the excess they had made.

Turning to business rents, the Government have announced in their code that the standstill is to continue until 31st May and that after that they will be permitted to rise gradually to the market level of 5th November 1972. The first question which arises is, why release the brake? There is a desperately limited supply of office accommodation—which forms a large part of the business rent problem—because of planning regulations, and we cannot allow a free market to operate when the supply is artificially limited. If business rents are to be allowed to rise only to the market rent of November 1972, why not apply the same principle to house rents and accept the level of fair rents of about a year ago as the standard for stage 3?

Rates are left entirely out of the calculation. I warn the Government of what will happen next April. Local government reorganisation will prove to be hideously expensive and they have absolutely no policy for dealing with the matter. In January 1973 the chief executive officer of one of my local authorities in North Cornwall, Newquay Urban Council said:
Local government reorganisation is not going to be cheap. It will cost you more in the long run.
The long run is not far away, because the costs which are arising due to local government reorganisation, which is at present in the planning stage, will come upon us in April.

Recently there was a warning from Mr. John Eyles, President of the Rating
1060
and Valuation Association, about what will happen. He said:
The rate levy is going to rise proportionately. It does not require any particular skill to arrive at this forecast as one can almost say that increased expenditure has been built into the new arrangements when one considers the merging of groups of authorities into single units which will without doubt reorganise on the basis of the highest existing standard.
It may be right for these new authorities to be reorganised on the basis of the highest existing standards, but inflation is built into the system and there will be an astronomical rise in rates from 1st April. What will the Government do about it? There is nothing in the code about it.

The Government have written a great degree of flexibility into the new pay code provisions. The essence of the matter is in the efficiency scheme. The question of productivity is an old problem which the Labour Government tried desperately to deal with. It is notoriously difficult to measure. The china clay industry, for example—the Minister of State, Treasury, may have a few of the china clay workers in his part of Cornwall, assuming that they travel that far, even though there are no trains, and will know some of the problems of the industry from reading his local paper—has made a genuine bargain with its workers to increase their pay as a result of increased efficiency. When the Prime Minister was in opposition, he said in the early months of 1970 that no Government should set aside this sort of agreement. Will the efficiency scheme, for which the clay workers are now suing their own company—I think the company are paying the legal costs—fall within the agreement in the code?

What of equal pay? It is all very well to raise pay for women in industries in which their pay can be compared with that of men who are doing similar jobs. The great difficulty arises in those industries in which there is no comparison with male earnings. A knitwear factory in my constituency is heavily in competition with other employers of female labour because they, being mixed industries employing men and women, are able to increase pay for women substantially because there is a standard with which to compare. But the company to which I refer, because it is involved in the knitwear industry, is unable to make any direct comparison with male employees.
1061
What sort of provision will the Government make for this type of situation?

I turn now from the detail of an irrelevant statutory instrument to the overall importance of a policy. I deal first with what seems to be agreed between us—and by "us" I mean all the parties in the House. The Government's aim was set out fairly clearly in the Prime Minister's speech at Walsall on 14th September and reprinted in the Conservative Political Centre's monthly report in October. He said:
This does not mean that we can drop our guard on the domestic sources of inflation. It would be crazy in these circumstances to throw away the progress we have made. It would be unthinkable to pile on top of the existing rate of inflation another 4 or 5 per cent. in price rises as a result of letting wages and salaries run riot.
It is my contention that in stage 3 the Government are doing just what the right hon. Gentleman warned against in that speech. It is indeed a recipe for running riot.

The Prime Minister was entitled to claim that his policy had to a certain extent worked. The figures he produced, which came from the Economist, showed not only that his policy has worked but that all prices and incomes policies have worked since 1964, when the Labour Party came to power. I have calculated that the figures that the Prime Minister did not quote show that in the 14 quarters since then in which there has been a statutory policy we have had an increase in output prices less import costs of 3.1 per cent. and that in the 20 quarters without a statutory policy there has been an increase in output prices less import costs of 5.4 per cent.

Of course it might have been better if the Prime Minister had said that all incomes policies, even the Labour Government's, had worked. Certainly the Labour Government's policy worked as well, or as badly, as the Prime Minister's policy has done. The Labour Party's "Programme for Britain" clearly refers on page 16 to a voluntary incomes policy
the objective of which must be to ensure that the growth of the nation's wealth is accompanied by steadily rising incomes with sharper rises for the lowest paid.1062
So there is all-party agreement on the broad objectives of a prices and incomes policy.

We are faced with long-term world inflation. It is a world disease but this country has had it over a long period very much worse than the world, or at least the OECD countries, as a whole. Nevertheless, their rate of inflation is rising seriously. Between 1960 and 1965 the average rate of inflation in the OECD countries was 2.6 per cent.; in the first two to three years of this decade it has been an average of 5.5 per cent. In Britain, for instance, in 1962 we had a rate of inflation of 1.6 per cent. and in 1963 of 2 per cent. By 1970 it had climbed to 6.4 per cent. This year it is about 9.3 per cent.

We have to ask why Britain has done so badly in relation to other countries. It is not a question which brings a simple answer—I accept that. The present rate of inflation of about 9½ per cent. is catastrophic. In the simplest terms we know that the average industrial earnings for a man are about £2,000 a year. The man entering industry at the age of 20 on the average industrial earnings of £2,000 will need, by the time he reaches the last year of his working life, at the age of 64, a total of £118,000 a year in order to maintain his purchasing power at that rate of inflation. This shows what kind of rot we are in, and in my view the Government are planning not to counter it but to ride with it.

When I said to the Prime Minister at Question Time last week that the stage 3 policy was not so much a counter-inflation policy but more a way of teaching the British people how to live in a banana republic, he was extremely angry, but it is just that. We are preparing to live with it. Stage 3 will usher in price increases of well over 10 per cent. and wages will certainly rise by 15 per cent. and more.

I simply warn the House of what happens to countries when they get over a rate of inflation of 10 per cent. In an article in the Financial Times of 25th October, Samuel Brittan gave a chart which showed the number of countries whose rate of inflation was up to 10 per cent. Then there is an enormous gap. There are no countries in the gap between 10 per cent. and 20 per cent. Those
1063
which get over 10 per cent. do not get 11 or 12 or 13 per cent. There appears to be some kind of law of economics which means that one goes from 10 per cent. to the stratosphere of inflation—and we are on the launching pad to that stratosphere.

The Government are presiding over a rate of inflation which will destroy totally our social structure. What do we do about it? The Prime Minister said in his Walsall speech that it was untrue to say that the money supply was running away, but today's Financial Times again shows what is happening. Bank lending is rising at an astronomical rate. The hon. Member for Oswestry (Mr. Biffen) is constantly reminding us of the question of whether we should raise taxes. He is in the camp of those who would raise them to solve the problem. It is no longer a question of whether it is right to raise taxes. It is a fact that we shall have to raise them sooner or later. The only question is how we do it in order not then to make taxation as an agent of inflation.

The Liberal Party's policy is to have a selective tax on those who cause the inflation. If one can tax wealth and estates, if one can tax the wealthy more than the poor, as is general policy, one can devise a tax which will bear not on the deserving and the undeserving alike but on those who cause inflation.

In dealing with the kind of tax which would be more acceptable or less acceptable, does the hon. Gentleman, with all the authority he has as the Liberal Party's economic and financial spokesman, agree with me that the most undesirable configuration of tax increases would be those designed to increase the value added tax in both scope and scale so that it approximated to that of the rest of the European Economic Community?

Yes, I accept what the hon. Gentleman has said. He knows, having already asked me to send him a copy of a speech I made during the summer, what my view of the economic policies of the EEC is. I do not now dissent from that view at all. The best form of tax to exercise on those who cause inflation on the employers' side would be a surcharge on the corporation
1064
tax of those who increase their absolute margins excessively, while the best sort of tax to impose on those who cause inflation through excessive wage gains would be a surcharge on the national insurance contribution, which cannot possibly be passed on. It would be a graded tax and would therefore at every stage be a tremendous disincentive to wild and excessive wage increase.

Of course I accept that this will not cure the whole problem of inflation. But it was not the Liberal Party which talked about cutting prices at a stroke. That was the Prime Minister. He is the one who made it seem so simple in 1970. He is the one to blame for the fact that people believe that it is a simple matter to counter inflation. It is, in fact, a much more difficult matter than the right hon. Gentleman ever dreamed of.

Of course one has to protect the low-paid and the pensioners against the rate of inflation which we cannot control by any means in this country. That is why the Liberal Party puts particular stress on statutory minimum earnings, on relating pensions to average industrial earnings and on having a threshold which is linked not, as in the Government's scheme, to the totality of the rise in retail prices, but to the specific rise in prices of imported food. I believe that that policy would go a very long way to solving a major part of the problem of inflation.

I come back to the point about a banana republic. The Government are attempting to buy the results of the next election with "phoney" money. They are making precisely the same calculation as the Leader of the Opposition made when he chose his June election date last time: that there is an interval between the time when wages have risen and the time when rising prices catch up, and if a Government are very lucky, astute and tricky, they can hop into that gap and call an election before the prices rise. It did not work for the Leader of the Opposition and I very much doubt whether it will work for the Government.

I think that the Government will have their "come-uppance" from the housewives with a vengeance because of the disgraceful policies which they have put before us and their total failure to control inflation. We shall be voting against the code tonight, not because we are
1065
against a prices and incomes policy—we wish to have a continuing and long-term prices and incomes policy—but because this code and its stage 3 are a recipe for a banana republic.

When earlier today the hon. Member for Enfield, West (Mr. Parkinson) tried to make our flesh creep with talk of crisis he reverted to some well-worn Tory phrases: there was suddenly a crisis in our affairs and we were battling for survival.

What the ordinary people of this country realise only too well is that, through crisis after crisis, there are born survivors and born losers, and the party which the hon. Member represents always seems to come out of a crisis in exactly the same favoured position as it went into it. Any strategy to overcome this crisis must be based upon a movement towards social justice in this country.

Talking about survivors brings me to the hon. Member for Cornwall, North (Mr. Pardoe). He is now against the value added tax——

As I understood the hon. Member's remarks in answer to the intervention of the hon. Member for Oswestry (Mr. Biffen), the hon. Member agreed that, of all the configurations of tax, a further assimilation towards European levels of VAT would be undesirable. I would remind him that he assented to that assimiliation when he and his party forced through the Second Reading of the Bill to take us into the European Economic Community. That is the truth.

It is perfectly true that I said that, and I stand by it. But what I was asked was whether I agreed that there should be an increase in VAT, and I accept that an increase in VAT would be the worst possible remedy for our present inflation.

Then I wonder how much of the Treaty of Rome and of the other documents of the EEC the hon. Gentleman has read, because they propose that we should assimiliate our rates to that level.

1066
I want to develop my theme of overcoming the crisis through a movement towards social justice, and I refer to a remark made from the benches opposite indicating the total lack of understanding of the Treasury Bench and of hon. Members opposite of what affects the standard of living of ordinary workers in this country. It is not purely a question of money wages; their standard of living is also made up of public provision. When the hon. Member for Truro (Mr. Dixon) said that he would not support taxes because they interfered with the consuming capacity of the British people he betrayed complete ignorance, because it is part of people's standard of living to have proper public provision.

For example, if people have back-to-back housing or lawns of postage-stamp size they need good public parks through good public provision. Yet under the Government's proposals, particularly under the Chancellor's latest proposals to limit public expenditure, public provision will be drastically contained. If people have social and economic deprivation they need a good State education system to help their children overcome it. Yet what do we find? We find that school buildings are among the first targets of the Government's cut in public expenditure, in order to help the building industry. We find that part-time education is now a fact in some of our cities. We find, as the paper Teacher told us in October, that there are mass resignations from the teaching profession in protest against teachers' pay scales.

It also follows that the lower paid are particularly dependent on the humane advice which Government officials can give to help them in their misfortune and to counter their hardship. Yet we find that civil servants are in a mood which is seldom equalled by the most militant industrial workers. In correspondence with me they have used language which I shall not embarrass the Minister by repeating, but the burden of it is that they are extremely disgruntled, and their disgruntlement means a lesser provision for the type of people whom I represent, the ordinary people of this country.

We need good hospitals to compensate for the inherited illness in our older industrial areas, and for the generations of under-doctoring in the less attractive areas
1067
of this country. Yet what do we see? We see medical staff leaving the hospitals. Only last Monday I heard of a hospital in South Wales which has to close the casualty and out-patients' departments at weekend because of the shortage of doctors. In addition to the shortage of doctors, there is shortage of ancillary staff, due to the fact that we make niggardly provision for our public servants and treat them disgracefully.

My main criticism of this code is that the Government are doing nothing to remedy the position of public servants and, in consequence, are doing nothing to help the standard of living of ordinary workers. It is not enough to say to ordinary workers "Your wage will go up by 11 per cent.", or whatever is the magical figure, if their children are going to schools which were built before 1903, and if the hospitals are overcrowded and badly doctored, and if patients cannot be attended to in an out-patients' department or have to wait for an operation. Those factors are part of the standard of living. Only when we treat the people who work in those public services in a proper manner will there be a good standard of living for all our people.

In undergraduate circles there used to be an old saying which was put to the Labour Party with great relish, "Who will do the dirty jobs under Socialism?", the point being that upon the standard of living being raised there would be no one to perform the unpalatable jobs. Let me ask the Treasury Ministers, who, no doubt, have been guilty of repeating that phrase ad nauseam—I am sure that the Chancellor of the Exchequer has not stopped reading his Central Office brief—who will do the dirty jobs under capitalism? I ask that question because it is in the dirty and unpalatable jobs that we have crucial shortages of manpower today.

I know that some of my hon. Friends want to refer to the coal mining industry, so I shall mention it only in passing. However belated the recognition by this Government, and, I regret to say, by some other Governments, of the importance of coal to the economy, unless coal miners are treated better than they are being treated at the moment there will be no hope of having coal as a substitute for oil, because there will not be enough
1068
miners to operate the pits which are open. Unless the Government take a sympathetic view of this crisis miners will vote with their feet. They will not work underground for hours in dangerous, dirty and dark conditions when they can go to modern well-lighted factories for seven hours a day and be paid more than they are getting in the mines.

My next point is a constituency one. Within my area there is a foundry which makes heavy flanges for oil pipes for export to foreign oilfields and for North Sea oil exploration. The management of that foundry was bad, as the present manager will confirm, and the piecework rates are obsolete and totally inadequate. The order books are full, and we are told that we are in a boom, yet that firm is losing out to the Germans and the Japanese because the foundry work is heavy, hard and dirty, and the foundry is now 50 per cent. undermanned for coping with the present orders.

I approached the Government the other day on behalf of this firm. The firm recognises that, both in justice to the people who are working there and in an attempt to recruit further workers, it ought to put right the piecework rates. What is the Government's answer and what is the Pay Board's answer? "I am sorry; we can do nothing for you." I had a long answer from the Government, but it meant absolutely nothing. What are the Government about? Is it the Government's intention to bow out of the heavy capital goods industry and turn to more ephemeral industries? The Government must answer this question. Time is not on their side.

The fact is quite simply that fewer men are prepared to put up with dirty and heavy work when they can work for better wages in modern factories within a short distance of their existing places of work. Unless the Government can tackle that situation we are condemned to going on from boom to boom but progressively with a weakened industrial structure.

I should like to turn to the question of prices and raise what to me are two central issues. The first is the question of food prices. I thought that when the hon. Member for Enfield, West referred to my ron. Friend the Member for West Ham, North (Mr. Arthur Lewis) it was
1069
very indelicate of him to talk of going to Canada and finding with horror that the housewives there had to have their bread subsidised because of the high cost of wheat, when we are told by the Government that in no circumstances can bread ever be subsidised. There is a Government—a Liberal Government, admittedly, but there is no magic in words, and "Liberal" means many things in many places—a Liberal, free enterprise Government, who are finding it possible to subsidise bread prices, while hon. Members opposite cheerfully oppose such a thing in this country while bread and food prices, with their 41 per cent. rise in three years, have hit the lower paid and those on fixed incomes most in this country.

I refer to the plight of the pensioners. Not only are they hard hit by the appalling and disgraceful rise in food prices; they are also hit because of the partial generosity of the Government. A pensioner with a dependent wife under 60 gets only £10 and not £20, which he would have if his wife were over 60. That is part of the partial generosity, and it is part of the lack of concern shown by the Government, because even the £10 bonus does not compensate pensioners and the low paid for the disproportionate effect which rising food prices have on their standard of living.

I thought my right hon. Friend the Member for Bristol, South-East (Mr. Benn) was justified in describing the speech of the Secretary of State for Employment this afternoon as disgraceful. In so far as we were able to follow the Minister's meandering logic at all, it was to the effect that no longer is the Price Commission going to publish prices.

I can add to the anthology which my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden) delivered. It was not only the CBI but Aims of Industry, in a recent publication, which was sent to all hon. Members, dealing with last month's television news, which said that the television emphasis on price rises had spread alarm and despondency. It criticised the television, whose reporting was, it said, creating alarm and despondency. That is the sort of mentality which we find.

The Government believe that we are in a highly articulate and sophisticated
1070
society, but many of the people who are old and on low incomes are unable to fend for themselves. Therefore, if the Price Commission is not going to tell them which rises have been approved and which have not, this so-called price code will become a fleecer's charter. Prices will go up, whether they have been approved or not and whether it is legal or not to put them up. Gradually, people will be cheated. Let us make no mistake about that.

I am interested in my hon. Friend's argument about prices. Will he agree that the Price Commission is only a sop to the housewives? In political terms it represents the greatest act of betrayal since Quisling.

I would describe it as public relations; but if it is responsible for public relations I would get another public relations firm in. It has failed to convince anybody of its impartiality or fairness.

I want to deal lastly with the effect of world shortage on prices and to quote the case of two firms in my constituency which manufacture chemicals. One manufacturers water softening equipment, 70 per cent. of which goes for export. It uses styrene monomer. This, incidentally, is another case which I brought to the Government's attention. This firm has to import some of it. There are three firms—Dow Chemical, Shell and Monsanto—which supply styrene monomer. Dow Chemical has cut its supply by 20 per cent. and has raised the price from £80 a ton early in the summer to £200 a ton, and it is still going up. Because Shell, under the price code for which the Government are responsible, obtained an interest in polystyrene, it says it is more profitable to manufacture polystyrene. So Shell has told the firm that as from 31st December next it will manufacture no more styrene monomer. Monsanto is quite incapable of bridging that gap.

All the while that this is going on, Shell and Monsanto, which manufacture for sale here at £80 a ton, are being permitted to export the chemicals direct to the Continent at about £300 a ton. Because of the shortage of materials, therefore, the firm which is based in my constituency has to go scouring the Continent to get sufficient chemical raw
1071
materials to keep in production and has to pay £300 to £350 a ton to import that which has been exported by chemical manufacturers in this country.

The second case concerns another large employer which manufactures filters many of which go to the motor car industry. Here we have a problem of the shortage of phenol. This is a world shortage, and the eyes of those on the Treasury Bench light up whenever one mentions world shortages. Unlike the Chilean anchovy, over which no one has control except other anchovies, here the Government are responsible; Britain is partially responsible for the chemical productivity in the world. If phenol and other chemicals are in short supply, it is in part due to the inadequate response of the chemical industry in this country. Because of the shortage of phenol, the price has risen from £350 in June to £1,000 at ton at the moment. Firms are having to go on the black market to get enough in order to keep going. Firms are completely unable to fix firm prices. They are unable to rationalise their production.

I wish to ask two questions. First, does it make any sense for us to have a prices policy which fixes, although nominally, a price in Britain at which chemical manufacturers are able to sell, if we do not impose export controls which make it impossible for them to sell abroad at a much inflated price? Because of the chemical shortage, firms are being driven abroad and are having to pay cut extra for foreign exchange to enable them to import.

Secondly, if chemicals are in short supply, is it not really time that we discriminated between those firms which provide useful social and economic functions in this country and those which we judge are performing less useful and less necessary functions? Otherwise, what we are doing by this code which we are asked to apply is to weaken the long-term economic and social base of British industry, which means that we shall never get out of the inflationary spiral upon which we are firmly embarked. Only by a soundly-based economy can we do this. This code provides no clue as to how we can solve that problem.

The only conclusion to be drawn from the speech by the hon. Member for Pontypridd (Mr. John) is that, as always in politics, one can never be right. There is massive unemployment and the Government succeed in abolishing it and produce some sort of a boom and are then accused of weakening the industrial structure. Many years of listening to this sort of debate have convinced me that people have a much clearer idea of what should not be done than of what should be done.

The realities of government appear to drive men of widely differing views and opinions towards this kind of policy, even in contradiction, it would appear, to their best interests, and even in contradiction to their instincts. In that case, therefore, which is unarguable, rather than the somewhat sterile argument of whether we should or should not have this kind of policy, I prefer to inquire whether we cannot do more to improve it.

We have been told that the Government have taken into account the increases in income arising from a higher level of employment. I can see no evidence of any calculations about regional pressures with the exception of London. It is towards that surprising omission in the policy that I shall address my remarks. I say "surprising" because regional factors have been, and still are, one of the most important considerations of Government economic policy. So why not in this matter as well?

My part of the country is enjoying four booms at once. They are the Government's boom, the oil boom, fishing and the consequential construction boom.

Exactly, and the hon. Member for Pontypridd accuses us of weakening the industrial structure. The fishermen in my part of the country can earn anything from £100 to £400 a week. The oil industry does not pay anything like the same rates but it is new to the area and it is massive in structure. Its technology is so expensive that labour
1073
is not, by comparison, so dear. Meanwhile the construction industry is fully extended, and it gives every indication of remaining so for years to come. No industry seems better equipped to manœuvre around statutory controls. in these circumstances, and particularly because the North-East and the North of Scotland have suffered so much in the past as low-wage areas, pressure on wages has become insistent.

However, no special provision is made on regional grounds even though my right hon. and hon. Friends are unflagging in their expressed desire to raise the level of the low paid. Instead we are told of a body to improve industry's capacity in this direction and a further report from the Pay Board by the end of the year on pay relativities. Whatever the merits of these proposals, they are undeniably long term, whereas this afternoon we are faced with the position of long-established firms unable to hold their labour because of Government policy wage competition which the Government cannot apparently prevent. In my view, that is unfair. The Government say that surely their idea is much better than employers simply competing against each other for the same labour and putting up the price in an inflationary manner.

My right hon. Friend the Secretary of State for Employment spoke, too, this afternoon about the shortages of manpower being usual and the only real answer being to move to a more efficient use of manpower. There can be justice and justification in that argument. I certainly do not want to dismiss it but it does not apply in the regions where outsiders are coming in—and in our case that means the oil industry. The fact of the outsider, the totally new industry, coming in is what threatens the interest of existing industry in any area. Many industries were located in development areas only at the behest and the persuasion and by the subsidies of Government regional development policy of many years past. I support that policy with enthusiasm, and always have done. I would regard its extinction with the keenest disappointment. But that is the threat facing existing employers who are not allowed to compete with incoming firms when they think they should. The only alternative is for incoming industry
1074
not to be allowed to pay over the prevailing rate for the area, and for various reasons that would appear to be impracticable.

Why cannot the Government yet arrange that in an area faced with the twin exceptional circumstances of shortage of labour and an influx of new industry there should be an escape clause in the application of this policy until, as my right hon. Friend the Prime Minister said in a direct reference to this case in an earlier debate, more houses have been built and more labour is available to meet the demand?

In paragraph 164 of the code the Government make a special case of London. They accept in that sense only a regional variation provided that it was being applied on or before 6th November. I recognise London's problems. I imagine that every hon. Member has personal experience of them. The accommodation in my part of the world, however, is just as expensive. Travelling distances are greater and food is dearer. I hope my right hon. Friends will, therefore, consider my plea urgently, because if they do not the future of well-established local firms in my constituency could be in grave jeopardy and that would be a serious and surely unnecessary casualty of incomes policy.

The main point about the code is that, contrary to the impression which the Secretary of State sought rather haltingly to give this afternoon, it is much less a seriously economic document than an implicitly political one. Its contents clearly signal the expectation of a General Election about a year hence, and, like all Government pre-election documents, it shows, sadly, how far national responsibilities are clearly abrogated in the interests of short-term political concern.

The truth is that these supposedly tough stage 3 proposals are merely a façade. The only reason why stages 1 and 2 were implemented in the first place was, in the words of the consultative document:
We cannot return to pay settlements giving increases at the rate of 15 per cent. or more of the kind which happened in the autumn of 1972.
Whatever the truth is about what Sir Frank Figgures did or did not say, and
1075
whatever the truth is about the Government's view of the prospects of wage increases in the course of this year, this is almost precisely what is likely to happen, on the best evidence, as a result of these proposals.

Because employees can group themselves in the way that is most favourable to themselves in order to take advantage of the split pay formula, the allowable basic pay increase is likely to average about 8 per cent. rather than 7 per cent. Then there is 1 per cent. for anomalies, ½ per cent. for Civil Service pay anomalies, and another ½ per cent. for equal pay for women. That takes us to 9 per cent. to 10 per cent. That is on the understanding that there are no evasions or breaches of the code, which in the present industrial situation one would be led to believe is rather unlikely.

Then there are bigger London differentials, increases in the shift bonus, merit increases and the extra day's holiday. This must take us to well over 10 per cent. But then there is more overtime; and wage drift, at a time of sharpening labour shortage as overheating gets a grip on the economy, is almost certain to add at least another 1 per cent. or 2 per cent.

If, therefore, wages can be expected to rise by about 12 per cent., without the threshold payments, and productivity rises by about 3½ per cent., as the Government expect, in line with the long-term trend, it must surely be anticipated that the threshold mechanism will be reached at 7 per cent. That is absolutely crucial for the success or otherwise of these proposals.

Once that happens, it can only be expected that, in terms of a closely interacting price-wage spiral, wages will be pushed up rapidly towards 15 per cent. We are likely, therefore, to be back precisely where we started from last autumn. The whole of this exercise, therefore, is turning out to be no more nor less than an elaborate façade. The root cause of this whole unholy mess was that the Government were determined, when they came to power, to start a boom. They were forced to start a consumer-led boom, which rapidly led to a huge suck-in of imports and a colossal balance of payments gap,
1076
which they then sought to counter by a very large devaluation of 20 per cent.

It is astonishing that this devaluation has hardly been mentioned today, though it is at the centre of our economic difficulties. It was a very large devaluation indeed, peaking towards 20 per cent., and possibly to go higher as a result of the downward floating pound. It must, therefore, be clear that the only way in which this kind of policy can be made to work and the only way in which equilibrium can be regained is through the nations agreeing to a temporary restriction in their standard of living. Yet, it is incontrovertible that this document represents almost the opposite line.

The tragedy of the present Government is that, as a result of the dogmatism of their early policies, they have produced such resentment and such dissent that they have now disqualified themselves from calling forth the temporary spirit of restraint on which and through which alone the securing of Britain's immediate economic future must depend. Instead, the constraints in these proposals are being definitely eased, albeit one can certainly disagree with the manner in which the easing is taking place. There is a general easing of constraints, and Britain's long-term economic needs are being unambiguously surrendered to short-term political interest.

When we had a devaluation the last time around, the Conservative Opposition, as they then were, raised a national hue and cry about how painful was the loss to the pound in one's pocket. This time the Government have sought tacitly to pretend that a devaluation that is 50 per cent. greater than that on the last occasion can be absorbed relatively painlessly. Yet it is folly to pretend that a cut in the pound's external value on this scale can be accommodated without much stronger, at least temporary, domestic checks. This document represents the clear folly of repudiating that necessity.

What Britain needs economically and what the Government have disqualified themselves from delivering is the inspiration of sufficiently strong domestic checks in order that the scarcely abated level of inflation during phases 1 and 2 in the last year can be prevented from spiraling
1077
completely out of control. Here I agree with the hon. Member for Cornwall, North (Mr. Pardoe). As we wait for that threshold payment inflation trigger to be sprung, as I am convinced it will be in the middle of next year, it is not merely the legacy of distrust over the Industrial Relations Act and the Housing Finance Act—although those are important elements as long as they remain unrepealed—that prevents the inspiration of a sense of restraint, but the whole ethos of the Government's record in seeking to reverse the balance of power and money in the interests of the upper classes and the rich. It has proved impossible to reverse this through an expedient U-turn, and hence to get that spirit of temporary sacrifice which is at present needed. It has been the enormous concentration of tax favours on the wealthy, indifference to reckless land and property speculation and the combination of a record Stock Exchange boom and record unemployment which have ineradicably set the tone of this administration.

These are not just past events. In the last few days another combination which is highly significant has occurred. Perhaps it is not surprising that the Minister made no reference to the question of property investment or the control of gains therefrom. There is no control of such gains in this document. In the last few days the Land Securities Investment Trust, Britain's biggest property company, upgraded the value of its assets by no less than 30 per cent., which is a sum of £300 million, carrying the total value of the assets of that company to £1.3 billion—at the same time as the Government have laid down that there will be even the charade of wage restraint for a further year and no doubt, if the Government were to win the next General Election, beyond that again.

Is it the Government's view of the fair society that a property company, as a result directly of the failure in phase 3 to impose a tax on the unrealised gains from property and to check properly the rise in business rents, should be permitted such gains at the same time as the Government impose wage restraint again in some form or other for another year?

It is this feel about the present Government which has also now been amplified by the latest official information in the Family Expenditure Survey, which
1078
showed that in the first two years of the present Government the income of the poorest 30 per cent. dropped sharply whilst the income of the richest 10 per cent. rose. That is not a fact that will cause much surprise to hon. Members, but it is the official confirmation which is so interesting. That was breaking a trend which had existed for the whole of the last decade.

Since then, the Government have imposed phase 1, and it can be expected that a great many people, particularly young house buyers, have had that small rise in real incomes, for which the Prime Minister has sought to claim credit, cut back further. The whole of the 40 per cent, rise—it is no less than that—in mortgage repayments has been omitted from the retail price index because, incredibly enough, mortgages are regarded as a form of investment and not as a form of outgoings from income at the time when repayments are made.

At the same time as this has been going on, despite the Prime Minister constantly preaching about the fair society, the Government have indulged in the political folly of going ahead with enormous cuts in taxation of unearned income, as a result of which the average executive in the over-£5,000-a-year group will start phase 3 with an income no fewer than 9 times greater than that of the pensioner. Will the Minister say whether that is really his view of the fair society?

Many of these facts are, no doubt, not well known yet to many people, but I am convinced that there has unquestionably grown up a profound sense not only of the obviously anti-working class bias of the present Government but of the Government's profound and continuing streak of unfairness. It is because the Government are vaguely conscious of this that they have now felt obliged, at a time when real restraint is necessary because of the enormous and probably continuing and growing devaluation, to bring in a document of this kind, in which electioneering is writ large on every page. We can only hope that the General Election, which we know is coming, will come sooner rather than later, because surely any objective person must believe that the necessary psychological mood for this country will be evinced only by a new administration.

Before making my brief contribution may I have the privilege, somewhat belatedly but at my first opportunity, of congratulating you, Mr. Murton, as Mr. Deputy Speaker, on your promotion to your high office and saying what very great personal pleasure it gives me to see you in that Chair.

This is the first time that I have intervened in a counter-inflation debate and I do so with some temerity. We seem to be a fairly esoteric club, and I have the feeling that the club formed by those who actually understand the prices and incomes policy may be even more esoteric than that formed by those who seek to intervene in the debates. Nevertheless I have prepared myself by reading the documents and I hope, Mr. Deputy Speaker, you will not rule me out of order if I stick closely to the document before us rather than ranging more widely as have some hon. Members.

The point I wish to make is a brief one and, I hope, relevant. I have to go back a little way to phase 2 of the counter-inflation policy to make the point properly. It was the feeling in many companies that the arrangements under phase 2 were effectively eroding their profit margins—which was in part the intention—but that that erosion was in many cases, especially in the food industry, prejudicing their opportunities of investing further in plant and equipment. This, they felt, was not in the best interests of the consumer or the country.

Therefore, during phase 2 they made representations to various Ministers. Upon publication of the consultative document they were delighted to find that their point had been recognised and that paragraph 13(v) stated that one of the objects of phase 3 would be to see that the reduction of profit margins by the operation of the control should be limited to 10 per cent., so that the fall in profits would not discourage investment.

There is not much that is controversial about that, but in Part II of the consultative document, which consists of proposed amendments to the code under phase 3, this statement of policy and principle was not carried through and the relevant paragraph of the document, although pay-
1080
ing lip service to the new principle, did little to implement it because it established that the starting point for the calculation of permitted price increases should be the level of costs per unit of output at 30th April 1973. In the period up to this date there had, of course, been frozen prices and serious erosion of margins.

Therefore, these same industries went back to the Government and said "Look, you have told us that the principle we were trying to establish has been conceded, but it seems that in the proposed amendments to the code nothing has been done." It was their impression that their point had been taken and that the statutory instrument would carry the intention into effect. To their alarm, when the statutory instrument which is before us was published paragraph 34 was identical to the relevant paragraph in Part II of the consultative document. The changes to the code are exactly as had been published as proposed changes, and are still objectionable.

The principle that the profit margin should not be eroded and that investment should be protected in these companies had not been carried through. What had happened was that between 30th September 1972 and 30th April 1973 those industries, and particularly the food industry, which were suffering from an increase in prices of raw materials, mostly imported, had made one or more applications to the Price Commission for permission to increase prices. These applications had by and large been granted but not in full. In the period between the end of September 1972 and the end of April 1973, the profit margins of these companies had been considerably eroded, and by the end of April 1973 their profitability was far less than it was in September 1972. Under the statutory instrument it is this reduced profitability which can be further reduced by 10 per cent. rather than the normal figure.

The point I wish to make is that my right hon. Friend on the Treasury Bench should convey to my right hon. Friend the Chief Secretary, who I understand is to reply to the debate, my urgent plea that this point should be looked at again and that, in the case of industries whose margins were constantly eroded under phase 2 during the winter of 1972–73, the starting point for calculation of price
1081
increases should now be costs at 30th September 1972 rather than 30th April 1973 as at present laid down in the statutory instrument. It seems from the wording of the instrument that there is enough flexibility for this to be done if the will to do it is there on the part of the Government. It is my short plea this evening that this possibility should be urgently examined.

It would be appropriate if I could congratulate the hon. Member for Liverpool, Garston (Mr. Fortescue) upon being in a position to break what I gather has been a long vow of silence. Perhaps in some respects he will be wishing in the months to come that he could have maintained that silence.

We are fast reaching a situation when we in this House are under permanent siege from lobbyists, all of them with deep-seated grievances. Last week we had the unprecedented lobby by the Staff Side of the National Whitley Council of the Civil Service, the first time that the Civil Service unions have combined in any exercise of that kind. On Monday of this week we had the Post Office clerical workers lobbying Members following a large rally at Central Hall. On Tuesday we had a demonstration here led by the leaders of the majority party in the GLC. Many GLC staff workers and London trade unionists also came to the House on that occasion. Tonight there are many people in the House lobbying Members on behalf of NALGO.

These groups, representing mainly while collar workers, are not customarily demonstrative people. For the most part they represent unions with no political affiliation. They are united in one thing. They have come to the House to try to convince the Government that just as phase 2 was manifestly unfair to them so phase 3 will do nothing whatever to redress their justifiable grievances.

What we are seeing is the tip of the iceberg. I hope that the House of Commons staff and police will be able to qualify for productivity bonuses under phase 3 because I have the feeling that they will earn those bonuses in the months ahead.

We are undoubtedly in for a winter of acute industrial discontent. We have seen the firemen on strike, the power workers are embittered and the Post Office clerical workers are on selective strikes, while the position in the coal industry is explosive. People will be queueing up to come to this House to put their case to hon. Members. The pensioners also will be on their way back here in the near future.

Are they all wrong? Are they all out of step except the Prime Minister? I wonder what kind of a dream world the Government live in if they think that these people would come along here and take all this trouble without some justifiable grievance. Do they think they are all misled? Do they think they are all militants? The truth is that these are people quite unable to equate with their living standards the glibly paraded Government statistics showing how rising earnings are outstripping rising prices. The Secretary of State's view, that the public sector is actually better off under his Government's wages policy is ridiculous.

No one has been harder hit in this situation than those who live and work in London. I want to underline the London argument and pick out specific cases.

I turn, first, to the public transport crisis. Phase 3 would allow an additional 20 per cent. for working unsocial hours, but most London Transport workers who are working unsocial hours are already receiving that kind of additional payment. What London Transport would like to pay is 33⅓ per cent. for working unsocial hours between Monday and Friday. It would like to pay an additional 50 per cent. rate for Saturday and double on Sunday. That is London Transport's case, and I am assured that the Greater London Council backs it and would like to see those payments made. The cost would not be great. Such payments would help to halt the appalling deterioration in services in London, at least till the publication of the somewhat belated Pay Board report due to appear next summer.

The matter has been put to the Prime Minister, who refused to see the leader of the Greater London Council to discuss the issue. I do not think that
1083
the Prime Minister would even have been prepared to select the GLC leader to take part in his "phone-in". The issue was put by letter to the Prime Minister, and at first hand to the Secretary of State for the Environment and the Secretary of State for Employment. They rejected it out of hand.

Now a word about the building industry in London. Again, almost every running GLC contract for housing or schools is falling behind schedule, because the Government have refused to allow additional cost payments to prevent labour from walking off the sites. Earlier today we heard from my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) about the lump. My hon. Friend is an expert on this matter and he was right. We know why labour is walking off sites. We know where it is going—into the virtually uninhibited private sector. The ultimate outcome is that the public sector building figures for London and other large conurbations are likely to prove disastrous. Once again, the blame should be laid fairly and squarely on the Government.

I turn now to the Civil Service issue, which is of particular concern to me. I have declared my interest in it on many occasions in the House. I have raised before—I raised it again recently—the question of retrospection, already referred to in the debate today. I underline the case again. There is no sound argument for not allowing the backdating of Civil Service increases to the beginning of phase 2, in view of the Pay Board's report that the Civil Service pay situation was undoubtedly a glaring anomaly. By refusing that proposal, the Government are perpetuating, in addition to that anomaly, an acute staff shortage in the Civil Service and in many Government Departments, notably in the Department of Health and Social Security. All this prevents the public from obtaining the service to which they are entitled and which the staff in those Departments want to give.

The Government should not underestimate, either, the determination of the Post Office clerical workers in their dispute. They feel that they have been treated with appalling shabbiness under phase 3 over their justifiable demand to
1084
have their pay situation treated as an anomaly.

We know, too, of the grave teacher supply situation in London and the London teachers' allowance issue. I doubt that there are any London Members who do not receive letters regularly or do not have teacher constituents coming to see them, telling them that they simply cannot afford to live in London on the salaries they receive.

In London, we are short of policemen, of postmen, of ambulance drivers; the local government services are in a sorry state; and we have a NALGO lobby here tonight. I have just had NALGO members from my constituency tell me that, like London teachers, they are finding it impossible to meet the cost of living in London.

Recently I asked the Chancellor about the tax that gets away. His reply showed that between 1970 and 1972 Schedule E remissions and irrecoverable amounts rose from £562,000 to £965,000, nearly double. For Schedules A, B and D the amounts rose from £7 million in 1970 to nearly £14 million in 1972, a very sizeable sum. The reasons for that were principally that the amounts did not justify proceedings, that there was insolvency, and that the taxpayers had gone abroad—presumably to somewhere like the Cayman Islands—or else were untraceable. The Government refused to give as a reason the chronic staff shortage in the Inland Revenue, and that is another aspect of stage 3 which I should like to investigate.

I am not suggesting that stage 2 or stage 3 is the sole cause of London's problems. Clearly there is also a failure of regional policy and an inability to persuade, cajole or coerce private employers to move to where housing and labour are more readily available, thus reducing the strain on public services in London. But it is clear that Government policy aggravates the problem enormously.

Sir Reginald Goodwin, who led the protest marchers to the House yesterday, is not a man of fiery temperament, but, like the white collared workers I mentioned, he has been driven to anger and uncharacteristic action. He warned the Government that their policy has
1085
threatened the collapse of London services and that strike troubles will spread. Clearly, the quality of life in London is bound to suffer from stage 3 restrictions which discriminate against the public sector in their practical application.

Earlier this year Sir Reginald Goodwin and his colleagues, with an overwhelming vote of confidence from the people of London, were elected to represent them. They are the legitimate voice of this great city and their views cannot be brushed aside in the cavalier fashion adopted by the Government. They cannot be snubbed in an offhand way; because in snubbing them the Government are also snubbing the people of London. I am sure the people of London will not forget that snub.

In the past I have argued for a voluntary incomes policy, and I do not go back on that, but how can it be a serious proposition with the present Government? How can the trade union movement be expected to co-operate, considering the background of the Government's present economic and social policy? There is no provision in the code for controlling food prices, and rent rises will continue. These essentials in the family budget will be hit, while the pay packets of the vast number of wage earners who are not able to fiddle their way through the code will be held down.

The Government promised that the draft code would be a consultative document, but the TUC was so sceptical that it walked out of the Downing Street talks. We now see how right it was to do so. There had been no material change to take account of the trade union viewpoint between the draft document and the statutory instrument being debated. Once again the trade union movement has not been consulted; it has been conscripted. Once again, consultation has been made a mockery, as it was over the Industrial Relations Act, the Housing Finance Act and the European Communities Act.

My final comment arises from a matter raised by my right hon. Friend the Member for Bristol, South-East (Mr. Benn). When we were in Committee on the Counter-Inflation Bill, I clashed with the Government over their insistence that Price Commission hearings should be in secret if the price fixer so asked. There was to be no discretion for the chairman
1086
of the Commission to say that he thought that the proceedings should be in public. The price fixer was to be in a position to say "Close the doors". After considerable argument the Chief Secretary to the Treasury acknowledged that there was a case, and he said that he would consider it. In the event, he did nothing.

I telephoned the Price Commission this afternoon and asked the simple question "When have the public been able to attend a hearing of the Price Commission?". The commission got into a bit of a flap and told me that the question had never arisen, that prices are considered privately on the basis of written evidence. I said "But there must be occasions when you disagree with the written evidence." The Price Commission spokesman said "Then our officials talk to officials of the company, and that is the end of the matter."

So this part of the Act never had any serious purpose. There was no question of the public attending Price Commission hearings and knowing what had gone on behind the closed doors of the commission. We are now in a far worse situation. The speech of the Secretary of State, when opening the debate, was quite disgraceful. It was incredible that he did not know what the situation is. More than that, he was evasive. I hope that the Chief Secretary will be able to clarify the situation when he winds up the debate.

The Price Commission's report suggested that regular announcement by the commission of price rises would create an impression that there are continual price rises. Does anyone really believe it is only an impression? Do people not recognise that it is a fact of Tory life that prices rises go on all the time? If they do not recognise that they should ask any housewife or trade unionist, who would quickly supply an answer.

The Government accepted the commission's view—one might say, at a stroke. The gag is clearly to be imposed under the code, and the Secretary of State, after the Chief Secretary had advised him, after the Chief Secretary had run across to the civil servants at the side, was in a position to acknowledge that. The gag will be imposed and lists of price rises will no longer be announced.

Life will be easier for the Government and for the commission; life will be much
1087
easier for the price fixers; but the rises will sneak up unannounced. It is little more than a confidence trick by the Government, a cover-up exercise unashamedly against the public interest. It is one more step backwards from the Prime Minister's pledge of open government.

If anyone cares to let me know of price rises in the pipeline before the rises actually hit the housewife I shall be delighted to make sure that the public is told and also to safeguard the source of that information. There are occasions when secretive and irresponsible government needs to be taught a lesson, and this is one such case. For my part, if in some small way I can help the Prime Minister towards fulfilling his pledge of open government I shall be delighted to do so.

I thought that I was to have the dubious privilege of speaking after the last Conservative back-bench speaker, but I see that the trumpets have sounded and the Whips have managed to gather in enough numbers to keep up the Government side till about nine o'clock. The fact that the Conservative benches have been so empty for most of the debate since six o'clock is a testimony to the lack of support for Government policy even from their own supporters. How they hope to convince the millions outside who are supposed to make their policy work heaven only knowns.

I was fascinated by the speech of the Secretary of State for Employment. My hon. Friends who have spoken critically of his speech have done him less than justice. He was obviously given rubbish to say, and he did it full justice. In the process of his speech the right hon. Gentleman used every meandering and detour to make a few false claims, find a few dodges and give a few misinterpretations. They need serious treatment in a debate such as this, for they tend to form the basis of presumptions on which policy is conducted.

The first and most obvious is his claim that workers in public industry would be worse off if it were not for the incomes policy, and this the day after his right hon. Friend the Chancellor of the Exchequer had told us of a further
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stringent restraint on the growth of public expenditure. That must have struck cold fear into the heart of every person who is dependent on the public purse for his wage or salary. How it is possible for the Secretary of State to follow his right hon. Friend the Chancellor of the Exchequer—who had made a diametrically opposite statement the day before—and to tell us that workers in the public sector were better off because of the incomes policy? It can be explained only by the fact that we have a Government who do not know where they are going.

Secondly, the claim was made at some length by the Secretary of State that the unsocial hours provisions of phase 3 were an unmitigated blessing for those workers who were in the unfortunate position of having to spend in going to work that part of their lives that would normally be given to leisure and family life. That needs some qualification, too, because, as my hon. Friend the Member for Islington, East (Mr. John Grant) pointed out, there is a restraint on the amount of additional and social premium that can be obtained from 20 per cent. which is less than that generally paid in industries where awards are already made in respect of unsocial hours, notably, the engineering and the electricity supply industries where the amount of additional unsocial hours award paid as an additional overtime premium is respectively time and a half and time and a third. The Government's suggestion of time and 20 per cent. looks rather sick by comparison and certainly will not do much to attract or retain the necessary workers in those industries bedevilled by the necessity to work unsocial hours.

We are talking about industries that are frequently low paid. People work unsocial hours simply because they are in low-paid industries and they are frequently industries with a monopoly of demand for workers in particular areas and therefore the workers, in order to have any wages at all, have to submit to unsocial hours. An additional premium of 20 per cent. on the kind of peanuts that they earn is still peanuts. Therefore, when, with a great blare of publicity and self-congratulation, the Government introduce an unsocial hours bonus, it needs to be strictly qualified against the realities of industrial life.

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Further, the Secretary of State spoke of the risks of not accepting the policy. He warned us of increasing unemployment. He warned us of just about every other evil short of bubonic plague. The whole package has been rejected out of hand by the TUC in reciprocation of the Government's rejection of the submissions by the TUC recently and in economic reviews over the past few years.

It is not the case, therefore, that we cannot afford not to have the policy proposed by the Government and embodied in this order. On the contrary, we cannot afford to have it, because what it means for us is a winter of crises, conflicts and cuts that will leave us economically and socially lame even after the Government have done yet another turn about or made yet another concession, and we shall then have to pick ourselves up from the ground and recover not from that general economic condition but from the consequences of a policy supposedly aimed at dealing with it.

With much wringing of hands by Government supporters, it is boasted that this policy embodies a realistic restraint on profits. Profits are, in many respects, an emotive subject. I suppose it is a piece of stage management for a Conservative Government to say that, in the interests of equity and fair dealing with the country in general, they firmly intend to control profits, but profits cannot be controlled by a capitalist Government in a capitalist society they would remove their whole reason for existence. If capitalism has a political expression, as it has in this and many other countries, and if that political expression fails to articulate or represent the interests of capitalism, then the political interest has to go out of business.

I do not think that the Government are willing to take that risk, so the best that they can hope for is a claim of a profits restraint policy, while knowing that it will have no realistic effect on the level of profit—and the figures for phase 2 show that.

When this subject was last debated, it was said that the figures preceded the introduction of controls. The latest figures are for this year, during which we have been subject to controls of one form or another all the time. The Cen-
1090
tral Statistical Office reports that total profits are up by £3,938 million in the first six months of this year. That is an increase of 13½ per cent. over the six months. It does not constitute profits restraint.

The individual company figures show, for example, that the profits of Vickers Engineering are up by 115 per cent., of Tube Investments by 101 per cent., of Wimpey's by 133 per cent.—and people ask why housing costs are rising—and of the Thomson Organisation by 64 per cent.

Whatever the rights and wrongs of profit earning no Government can hope to gain from the overwhelming majority of the people conformity, respect or submission to an incomes control policy when it is blatantly obvious that in an important sector, where vast wealth is being increased by additions of vast wealth, there is a complete escape, an insularity, from that policy. In the interests of consent and consensus the Government must make that area of the policy work, or, at least in the interest of honesty, they have to admit that they do not intend it to work.

The Government need, encourage and welcome increases in profit margins of that kind, because they recognise that it is the only way to fuel the growth which they seek. In a capitalist economy the only incentive for additional investment is a continuing growth of profit. That is a fact of life. It is answerable, and it exists as a code throughout the western world.

The trouble is that it has not worked. As a means of attracting additional investment it has been a flop, a total failure. The Government have even admitted that failure by amending their expectations of economic growth. Originally, as everyone remembers, the figure was a grandiose 5 per cent. It has now been adjusted to 3 per cent. to 3½ per cent., and the difference between 5 per cent. and 3½ per cent. is the measure of the failure of British capitalism to respond to the blandishments offered by the Government. It is going to cost this country several hundred millions of pounds. It is the price that we pay for a timid, unadventurous, immature, lazy, capitalist system, and I do not know why we should seek to escape from that view.

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The Government have not only returned to a policy of large cash handouts to encourage investment, especially in the regions, for which we are grateful, but they have undertaken statutorily to control wages. In addition, they have a profits policy that is not worth the paper on which it is written. In spite of these gifts, blandishments and encouragements, the level of manufacturing investment is 21 per cent. down on the 1970 figure. If that is not failure to attract investment and to spur growth, I do not know what is.

In addition to the gifts and encouragements that the Government have offered over the past few years, in phase 3 we have even more frenzied attempts to encourage British capitalism, the owners of wealth, to contribute more of that wealth towards productive investment. In phase 3 there is a possibility that was not available in phase 2—increased depreciation may now be passed on in higher prices. That was not permitted under phase 2.

There is a guarantee that in the event of a 10 per cent. shortfall in profits, a company may pass on higher costs by increasing prices. That did not exist in phase 2. The category II firms do not, as the Secretary of State would have us believe, turn into category I firms under phase 3. Far from doing so, all they need to do is to report, and their only punishment will be a request to make retrospective cuts in prices if they have transgressed the rules of the code. Therefore, category II firms, those with a turnover of between £5 million and £50 million a year, are still exempt as they were under phase 2.

Finally, the small firms that were completely unsupervised in phase 2 still have that privilege in phase 3. When we read in The Guardian on 5th October that the small, category III firms had been raising prices at double the rate of the top 200, which are in category I, we began to realise where our enormous rate of inflation had come from.

At every stage of the Counter-Inflation Act the Opposition told the Government that people did not care whether inflated prices were charged by the large firms or the shop round the corner. People object to the fact that the high prices are charged.

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But our whole approach was pooh-poohed. We were told that the ultimate control would reside in the grand boardrooms of the top companies of which the smaller companies were either subsidiaries or on which they were dependent. That is how the price control was to be worked. It did not work. The friendly neighbourhood shop has been robbing the friendly neighbours right, left and centre. The Government refuse to make any attempt to restrain this important sector of price increases. The respect and consent necessary in the operation of an incomes policy in these circumstances cannot be forthcoming, and the Government are silly to expect that any trade unionist worth his salt, in the knowledge of figures, situations and facts of that nature, would be willing to submit himself and his members to the constraints of phase 3.

Perhaps the shortest and most adequate way of summing up all the inefficiencies and injustices of the pay provisions under phase 3 is to consider the case of the miners. The Minister would like us to believe that the miners could obtain 13 per cent. between the percentages allowed under phase 3 and an additional 3½ per cent. from an additional productivity deal which could be drawn up between the board and the workers in the mining industry. If the Government have not yet learned this lesson, they will learn it the hard way in the next few months.

The miners are not interested in juggling percentages. They are not interested in swapping fractions. The essential point of their case is that they are simply not earning enough money for the kind of work they do. No amount of round-the-table conferences sweating eleventh hour exchanges, offers or sub-offers, splitting or pairing, will make any difference to the nature of the miners' claim, or to the fierceness with which the miners in the coalfields ask their executives at regional and national level to prosecute that claim.

They are simply not getting enough money for what they do. For the £25-a week surface worker, even the full 13 per cent. would be peanuts—hardly worth having. For the £27 and £36 per week underground men, the offer does not pay for the risks they take in getting coal. It does not constitute enough of a bribe to persuade them to stay in the industry,
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when there are better and cleaner prospects outside.

The top-paid miners in the British coal mining industry those employed by the National Coal Board—are getting 5 per cent. less than the average manufacturing wage. They do a job which every manuturing worker in the country would recognise as superior in risk and which has a productivity record that is superior to every other sector of British industry.

My hon. Friend will recognise that it is difficult for me to speak as time is getting on and several hon. Members have flitted in to speak and I have been put at the bottom of the list. There is a matter of major importance throughout the coalfields. Although the National Coal Board is offering £2.25 plus an unsocial hours payment of 17p for 14,000 workers—because there is a serious loss of manpower with nearly 700 miners leaving the industry per week——

I will finish quickly. A private company, the Cementation Company, is offering miners £15 a day to take up work inside the British coalfields. Surely that is justification for the increase demanded by the National Union of Mineworkers.

I was absolutely fascinated by what my hon. Friend was saying. I am quite prepared for him to make a detailed and knowledgeable contribution to my speech, as only he and his mining colleagues in the House can. The unfortunate thing is that no miner has spoken in the debate. I hope I may play second best by representing a mining constituency.

My hon. Friend is absolutely right and raised the point I was coming to. Every week, because of the level of pay in the coal mining industry, 600 to 700 miners leave the industry. In South Wales last year 1,600 miners left the industry. Cementation, Turriff and other private contractors are being paid enough by the National Coal Board to employ coal miners at £80 a week to break open new areas underground and to undertake underground maintenance work. These men are doing precisely the same work as
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men earning £27 and £36 a week. They are, in practice, doing it less regularly with less danger and are certainly not doing it for the length of time that the lower-paid miners are.

If it is the case that in order to get men to undertake development work in the pits, private contractors are permitted, and are able, to pay £80 a week, should not this come into our consideration of the fair weekly wage for the man working underground or the man who supports and services him above ground? The miners ask for £45 a week. The people in the coalfields, both in the pits and outside, would support them to the last man if they asked for £50 a week in 1973. This is the kind of figure for which the British miner in South Wales and other parts of the country is willing to fight for right down to the last week, the last day or however long it takes to get that kind of figure in his weekly wage packet.

We now have the ridiculous situation that, because of wage rates in the coal industry and the financial constraints placed on it, the board is closing mines which are marginally uneconomic, at a time of an extraordinary and extreme energy crisis throughout the world, and particularly in our own country. The board is closing mines which still have 15 million to 20 million tons of coal in them, because it needs the men from those mines to go to other mines which are marginally more prosperous.

That is happening at Ogilvie Colliery in a neighbouring valley to that which I represent. It is in the constituency of my hon. Friend the Member for Caerphilly (Mr. Fred Evans). The mine, in which 700 men work, is being closed down, with all that coal underground which could be exploited, because five or six neighbouring pits are up to 150 men short in their normal manning complement.

That is the economics of a madhouse, not only because we need the jobs in which the miners can justifiably ask for higher wages, but also because there is critical fuel shortage which is likely to get worse as each week passes. Coalmines are being closed because of the inadequacy of our economic policy and the parsimony of our wages control policy.

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The Government want growth, but they cannot have growth without coal. They cannot have coal without miners, and they will not get miners without money. The sooner they realise that, the sooner we shall return to some kind of stability in the areas which we represent, and remove the threat of instability and chaos in the British economy. But until they learn that lesson, they cannot have any hope of presenting themselves as a Government who are in touch with the people and the needs of the country. The only demand that can arise from that situation is that they get out and let someone else get on with the job.

I would like to take up some points made by the hon. Member for Bedwellty (Mr. Kinnock). He talked of the "friendly neighbourhood shop" and its inflated prices. I sincerely hope his local paper reports those remarks, because I believe that he has no basis on which to make those accusations. Indeed, the friendly neighbourhood grocers in his constituency are in competition with the big boys—the 200 which were mentioned. He has only to speak to those shopkeepers, who are his constituents to find that they have tough competition. He should look at the hyper-market which has opened in South Wales to see what has happened to the friendly neighbourhood store. He would then retract what he said, because I do not believe there is any basis of fact in it.

The hon. Member for Cornwall, North (Mr. Pardoe) raised a point in his speech subsequent to an interruption of mine. He asked why the profits have risen in the big super-market chains. The technical answer is extremely simple: they are introducing more non-food line which have a higher profit margin. Surely that is acceptable.

The hon. Members for Pontypridd (Mr. John) and for Bedwellty have mystified me. In all my years as a Member of Parliament I have heard noises about the regions and the need for jobs in the regions. The hon. Member for Pontypridd said that a casting works in his constituency is losing men to other jobs. The hon. Member for Bedwellty has just said that the coal mines are losing men to
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other jobs. I say "Thank goodness for that." In South Wales men are leaving these jobs, which means that there must be other jobs. People do not leave the regions easily. Therefore, the jobs to which these people have gone must be within Wales.

The hon. Gentleman is twisting the argument of my hon. Friend the Member for Pontypridd (Mr. John), who said that in the works he mentioned the piece rates were obsolete and there is no provision in the pay code for altering them in order to attract skilled labour. The fault lies with the pay code and therefore with the Government.

I have taken the hon. Member's point absolutely correctly. He said that men were leaving these foundries because of the pay code. That is correct, but there must necessarily be other jobs in the area for them to go to or they would not be leaving.

I let the hon. Gentleman get away with something before and perhaps he will have another chance, but on this matter he should read the pay code. He will find on reading it that one of the means of avoiding the code is to move one's job. One of the important reasons why people are shuffling between different jobs is to try to keep up with inflation. That is the only way they can get an increase which will permit them to keep up with inflation. We have to face a realistic choice concerning the coal miners. Do we want coal or not; because the price of having coal is paying miners decent wages to stay in the industry? From the hon. Member's knowledge of the regions he will know that they would be prepared to do so.

In Standing Committee I said that that was the great problem with stage, 1, stage 2 and stage 3. Those people are not leaving to beat inflation, as the hon. Member suggested. They are leaving to get a new opportunity to better themselves. There are two ways of looking at this. The hon. Member for Pontypridd also accuses the Conservatives of deciding that any boom will do and
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that this was ruining the structure of industry in his area. I remember our being accused in the House of having a boom only to do with bingo. Every boom we have when in power is obviously wrong for hon. Members opposite.

My hon. Friend the Member for Norfolk, North (Mr. Ralph Howell) took the unemployment figures apart in his speech. He was absolutely right to do so. I know the regions and have lived in areas of high unemployment all my life. The unemployment figures need examining by the House. It is silly for us to hurl these figures backwards and forwards when we are provoking inflation ourselves. This matter wants taking out of the party quarrel. Let us get a new basis of measure. The hon. Member for Bedwellty laughs. I apologise, because I know that Labour Members from the regions will lose their favourite argument if these figures are put right.

My constituency is bursting with employment, as I wrote and told the Chancellor of the Exchequer this week. It is dramatically short of labour, the local papers are packed with advertisements, and there is a queue of advertisers waiting for space. In my constituency we are losing highly skilled men when they come to the age of 65, and not only because of compulsory retirement. If highly skilled men carry on working after 65, they can earn £9.50 in a few hours. We should change the earnings rule or abolish it. It would not be terribly inflationary if this occurred, and there would be a great percentage paid back to the economy if some of those people carried on working. This would have a good social connotation too, because to finish a man completely at 65 is one of the cruellest things we can do.

Obviously, the labour shortage this year is made worse by the fact that there are no school leavers. But nothing that has happened so far in stages 2 and 3 has surprised any member of the Committee. World prices are what have knocked the Government in the last year——

In 1960, the base year, the world food price index was 100. A year ago it was about 146. This year it is 246. That is what has happened to world food prices. Food prices have gone up overall by 16 per cent.—1 per cent. because of the Common Market. I should say that vociferously for the hon. Member. The other point is that import prices of food going into manufacture have risen by 26 per cent., but the wholesale price has risen by only 11 per cent. and the retail price by only 3½ per cent. That is a near-miraculous achievement, which hon. Members opposite should acknowledge.

I said that it was rubbish and tripe because only yesterday I was in a country market where swedes were selling at 14 lb for l0p, potatoes at 56 lb for 56p, lettuces were 1p each, and 50 cabbages were going for about 25p. Today I was in the New Cut, just along the road, and saw swedes being sold at 7p a lb, potatoes at 8p a lb and so on. That is not the effect of world prices.

That is what the hon. Member is suggesting. Someone must pick the food and get it to market. Even the auctioneer in the market is worth his keep. The food must be brought to the big cities, to Covent Garden for example. Friends of the hon. Member, the porters, have to carry these commodities and be paid. The food has to be taken to the retail stores, which have bills for rent, rates, lighting, heating and staff to pay——

Perhaps the hon. Gentleman will be lucky now; I have just dropped a batch of notes.

This is the old political argument about the middlemen. The middlemen are in competition with one another. World prices have risen; reasonable people in this country know that that is the simple and complete truth about world prices. This is what has pushed the Government on to stage 3. If world commodity prices had not risen, there would have been no stage 3—or if there had been, it would have been much easier on union bargaining and on prices.

We have to make a choice, and this Government have made the right one—to go for growth. We are tackling the problem of inflation through stages 1, 2 and 3, and we are not stopping growth. The other way is to count completely on the money supply. One can stop inflation that way, but at what price? We should all acknowledge the choice we make. I was born in a place with 33 per cent. on the dole. That was not the last time the money supply was leaned on that hard—that happened in the 1930s—but I was born in 1920, when the money supply was jumped on.

Yes, the prices came down in two years, but so did wages; and something went up. Unemployment in 1920 was 2.4 per cent. but had risen by 1922 to 15.2 per cent. Some hon. Members and outside organisations ask us to use the money supply to halt inflation. That is the alternative that the Government have not chosen—the alternative of unemployment. An unemployment rate of 15.2 per cent. of our working population would mean little short of 4 million people out of work. I would not like to see 4 million, or even 2 million, or even 1½ million, or even 1 million people on the dole. A deliberate choice has been made to avoid that situation. The House should recognise that if money supply is cut the consequence is unemployment.

I am one of the individuals who advocate monetary discipline. Would not my hon. Friend agree that no one in this House or outside it is advocating monetary discipline immediately but that there should be a gradual turning of the tap, a gradual reduction in the increase in the money supply? No one is advocating reduction of the money supply.

I have heard none of my hon. Friends arguing that unemployment should be created. Nevertheless it would be created by cutting the money supply and I do not want to see it. None of us wants to see it. To pretend that the Conservative Party is in favour of such a situation to solve the problem of inflation is fantasy on the part of the Opposition.

Most of us dislike phases 1, 2 and 3. It is no secret that my right hon. Friends the Prime Minister and the Chancellor of the Exchequer also dislike it. They went on record to that effect at the Conservative Party conference. Sometimes people have to do what they do not like. This is an attempt to control inflation. I believe that the Government will have some degree of success. I believe that world prices will drop this year. I am convinced that next year we shall win the General Election.

There are many fascinating features of the Government's pay and prices policy on which I could comment. The failure of the Government to hold prices, to deal with rampaging land values and to halt the increases in rents, mortgages and dividends, are facts of serious concern. But in the limited time at my disposal I want particularly to focus attention on the grave crisis of confidence which now exists among thousands of decent, industrially-reasonable members of the staff of the Post Office Corporation as a consequence of the decision of the Pay Board on anomalies.

Is my hon. Friend aware that in Swansea many employees of the
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Post Office Corporation have written to me and to my hon. Friend the Member for Swansea, West (Mr. Alan Williams) protesting bitterly against the failure under phase 3 to give them the financial awards similar to those given to the civil servants? Is my hon. Friend further aware that my hon. Friend the Member for Newport (Mr. Roy Hughes) has today had a reply from the Minister of State, Department of Employment stating that no retrospection for civil servants will be made to 1st April last? Are not these two flagrant examples of injustice?

I am grateful to my hon. Friend for what he has said. The situation he has described exists also in Manchester, Glasgow, Birmingham, Edinburgh and London—indeed, throughout the country.

I was referring to the decision of the Pay Board on anomalies. It is a decision which has subsequently been endorsed by the Prime Minister and the Secretary of State for Employment, and it is a decision which opens up the possibility of an ever-widening gap in salary levels between civil servants and the staff of the Post Office Corporation.

It will be recalled that the Pay Board has accepted that the pay of civil servants falls within the narrow limits of the criteria for anomalies laid down by the Government, yet the staff of the Post Office Corporation, who prior to 1st October 1969 were themselves designated as civil servants, now find that the claim to have their pay regarded as anomalous has been rejected. The ironic feature of this decision is that it has been made by a Pay Board which was established to deal with unfairness but which itself creates further injustice. The injustice of this decision lies in the fact that the staff of the Post Office Corporation are performing precisely the same jobs and tasks as they undertook when they were designated as civil servants.

I am mindful of the reply given by the Prime Minister following a meeting with members of the Council of Post Office Unions on 3rd October. In replying to the representations which had been made to him, the Prime Minister said that it was necessary to have a tightly-drawn definition of anomalies if special treatment of such groups was to be justified, and that only groups with established pay
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links or defined formal procedures had a specially strong case. What stronger case exists than that of the staff of the Post Office Corporation, who prior to October 1969 had their salaries and pay determined by the Civil Service Pay Research Unit—the same Pay Research Unit which determines the pay of civil servants whose pay has now been accepted as anomalous?

I hope that the Minister will comment upon that decision tonight because of the anxiety among the staff of the Post Office Corporation, who see a possibility now that the pay of the civil servant with whom they have always had a very clearly defined pay link has been accepted as an anomaly, that the civil servant may have an advantage of £2 to £5 a week. I say "Good luck to the civil servant", but I feel that the injustice to the staff of the Post Office Corporation should be looked at again.

One of the most significant features of the claim put forward by the staff of the Post Office Corporation is that it is supported by the Board of the Post Office Corporation. The claim seeks nothing more than to be treated on the basis of fair comparison, and to be treated as an anomaly by the Pay Board. I believe that this is eminently reasonable. Fair comparison is what the staff of the Post Office Corporation are asking for, and it is not an unreasonable argument to advance.

I am mindful of the fact that, in the run-up to the next election, the Government are frantically endeavouring to improve their credibility. Let them make a start now and give the staff of the Post Office Corporation, the miners and all the other workers the justice which has been denied them for so long.

I am conscious that the ground of this debate has been well tilled, and I am not confident that the seeds I shall sow will be productive of a particularly novel crop. There have been two criticisms levelled at this policy of the Government. The first is that it will not work and the second is that it is inequitable. But I would say that, taking account of the pressures from outside, it has worked up till now with tolerable success.

Order. The hon. Member for West Ham, North (Mr. Arthur Lewis), is quite wrong. The hon. and learned Member who is now addressing the House has been here for a long time this afternoon. The hon. Member has no right to make those objections.

The first criticism—that this policy will not work—is associated in particular with the views of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and with those who believe in a strict monetary policy. I am attracted to their arguments; they are clear, they are simple they are cogently presented At the end of the day, however, I am not certain that they have entirely faced the consequences of the propositions which they have advanced.

In the first place, it seems to me inevitable that the implementation of their policies would result in a severe check to the growth which has at last got under way. Whether the converse is true I am not entirely certain. It seems to me that it generates argument such as we have seen between those who believe in salvation through faith and those who believe in justification through good works. However, it is not necessary for me to go into that argument.

The second consequence which I do not think the sponsors of that proposition have entirely faced is the inevitable increase in unemployment. I believe that, if any criticism can be levelled at the Government's policies over the past three years, it is that they over-reacted to the unemployment figures. Of course I am conscious of the social suffering which unemployment inflicts, but I believe that unemployment would have worked itself out, though perhaps not quite as quickly without the massive injection of Govern-
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ment money which we have experienced. Equally I believe that no Government could contemplate now the kind of unemployment which the monetarists' theories would inevitably inflict on the country.

The question is how to reconcile growth with full employment and a reduction in the rate of inflation. It is perhaps over-optimistic to talk about a total containment of inflation. What we can hope for is a reduction in the rate. In the long run, I believe that a gradual reduction in the money supply and in the rate of Government expenditure and a reliance on market mechanisms will perhaps work. I recognise that the free market is no longer entirely free, and that we have distortions introduced by the nationalised industries, which are largely monopolies, and by the massive Government and local government payroll. This is no criticism of nationalised industries. It is a statement of fact. They are monopolies, and no free market system can operate very easily with such large entities undisciplined by competition.

Unfortunately, however, we are not concerned with the long run. We are concerned with the short run, and I say with candour to the House that I have travelled the road to Damascus and I have become reconciled to a prices and wages policy.

I will, but by the time we face the electorate it may well be that we shall have passed through this phase. As I have said, in the long run we must depend on the market mechanism, a reduction in Government expenditure and a control of the money supply.

In the short run I think we are possibly focusing on the wrong question. The right question is this: why is it that the productive capacity of this country over the next year is capable of sustaining an increase of only 3½ per cent.? This is, I think, the real failure with which we must grapple. Therefore, we must judge the order that we are debating tonight not only in terms
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of equity but in terms of its effect on the productive capacity of the country.

I do not seriously believe that the country will regard as inequitable an order that permits increases of 7 per cent. or £2.25p a year with an adjustment for special factors which, on an informed view, is likely to lead to increases in wages of 10 per cent. this year. Of course there will be individual cases of hardship and of inequity, because a statutory prices and incomes policy is a blunt weapon, as I fully recognise. That is why it took me a long time to reconcile myself to it.

I have no doubt that Labour Members can and will continue to produce examples—and no doubt my hon. Friends will do the same—of cases of individual hardship, of cases where people have been left behind. But Labour Members never face up to the consequences of their policies. They are imperfectly reconciled to the free market economy. Some of them not at all; they want a system of State Socialism. They must therefore face the fact that under such a system it is impossible to make the fine adjustments that can often be achieved by the market.

I am saying that justice is extremely important, and if this package is to command the support of the country, let alone this House, overall justice must be seen to be done. I do not know the views held by the hon. Member for Bristol, Central (Mr. Palmer) on this matter because there is a wide divergence of views on the Opposition benches between those who half-heartedly support a free market economy and those who go all the way to a system of State socialism. My proposition is that a system of State Socialism is so imperfect, ham-fisted and insensitive to small adjustments that it will produce far worse anomalies and inequities than this temporary measure. The Opposition do not face up to that fact sufficiently and, therefore, criticisms of this order come rather ill from them.

I recognise that there are bound to be cases which are not met in full by this kind of order. But at any rate I hope, and I hope that my right hon. Friends
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share my views on this, that the measure will be of short duration. Because I am concerned more with the long-term growth prospects of the country and less with the short-term anomalies, I fear that the order might perhaps damage those prospects. It may perhaps not provide the scope for development in investment that is crucial.

There are many obscurities in the order and I invite my right hon. Friend the Chief Secretary to explain the intricacies of paragraph 34. It will probably tax him, and I do not criticise him for that, because it is a closely-worded provision. I am not over-concerned with the minutiae. The difficulty in debating the order is that we cannot put down probing amendments, so that I hope that my right hon. Friend will make the whole matter clear. My overall impression, however, is that maybe the Government have leaned a little too hard on profits.

I know that the Opposition will not make the crude point that profits equal dividends. Profits are the source of investment and reinvestment, and it is for that reason that we must be tender with profits and scrutinise the order with particular care. Of course my right hon. and hon. Friends will say that investment intentions, as communicated by the CBI and the Department of Trade and Industry, show robust confidence in the future of British industry, and I am glad to hear it. But investment intentions are largely the fruit of decisions taken a month or two previously and we have to face the fact that future investment decisions will be taken on the basis of this order.

My concern tonight is that people will be discouraged by this order, with its undefined length of operation from ploughing back profits and from reinvesting on the scale necessary to equip British industry.

The problem with which we have to concern ourselves is that the productive capacity of this country at present can sustain an increased growth rate of only 3½ per cent. next year. On that basis I ask my right hon. and hon. Friends to keep this position under close review. I know that they will do that. They have deliberately left themselves a certain flexibility and room for manoeuvre so that they can terminate the order when they feel that it has served its purpose.

1107
I think that all of us in the House recognise—this is probably common ground between hon. Members on both sides—that the medicine embodied in the order is unpalatable but we can accept it if it ensures us a breathing space in which we can master to an extent the onward surge of inflation, if we can taper off, not too dramatically, the increase in Government expenditure, and if we can allow, perhaps, the cycle of virtuous growth to get under way, which will enable us once more to compete on level terms with our European and Japanese competitors.

On a point of order, Mr. Deputy Speaker. The speeches in the debate have been about fairness and unfairness. I have sat in my place since 2.30 p.m. I have not moved. I have heard hon. Members making their speeches and then walking out of the Chamber. This is a regular occurrence.

If it is any consolation to the Chair, although it is not for me to console the Chair, one can never satisfy everyone—as the Secretary of State has discovered.

I begin on a narrow point. We have had some argument about what would happen in regard to the Price Commission's report. I think that I know what has happened. I think that chairmen of Tory associations have said to the Government "You lot must be barmy to keep having these regular lists of price increases
1108
put out; find some way of dodging it." But it is not altogether clear whether the Government have found some way of dodging it. We had a great dispute as to whether they had, and this will all be made abundantly clear to us by the Chief Secretary. I do not wish to anticipate that explanation. I am sure that it will be satisfactory. However, I should like to read to the Chief Secretary, as an assistance to him, what the Secretary of State said in Committee on the Counter-Inflation Bill.

In reply to a question on this point from his hon. Friend the Member for Oswestry (Mr. Biffen), the Secretary of State said:
I was not in any way seeking to lessen the degree of Parliamentary accountability when I referred to that and I should like to reiterate that in the type of cases which my hon. Friend the Member for Oswestry cited it would be perfectly possible to call in question the action of the Price Commission on any decision by asking the appropriate Minister a Question… As one who has asked as many pointed Parliamentary Questions as any of my hon. Members and many hon. Gentlemen opposite, I may say that it is effective in influencing future policy to have Ministers called in question for the action of bodies which they have been party to setting up."—[OFFICIAL REPORT, Standing Committee H, 5th February 1973; c. 121.]
If the Secretary of State's words mean anything, we know the answer that the Chief Secretary will give us later. There will be no restrictions whatever on members of the public or Members of Parliament questioning the Price Commission about whether it has or has not confirmed increases.

I turn now to the more general points that the debate raises. There is a great deal that the Labour Party and the trade unions could say against phase 3, and especially against the Pay Board, about which I particularly want to talk.

I do not want to do it that way. I want to defend the proposition that no one could conceivably see any sense in stage 3 as now presented, whatever his ideology or even assuming he has none, which I take it is the present position of the Government. In any discussion of this kind it has become essential to draw a sharp distinction between two quite different things—events and the Government's perception and description of events. They do not bear very much correspondence to each other any longer,
1109
which I assume is the reason why the Government are so tetchy about any breath of criticism from any quarter whatever which casts any doubt upon the series of triumphs Ministers have persuaded each other they have had.

The Secretary of State had a difficult task, and I do not think we had the proper ministerial statement about what the Government think has happened. I want to be fair and to give that statement, as I am sure the Chancellor would if he were here, and indeed the Chief Secretary. I like the Treasury when it explains this. It has explained it. I have a document which more or less puts it the ministerial way. It runs like this:
During the time of the last Labour Government the Labour Party were devoted opponents of a statutory prices and incomes policy and now only oppose such a policy for reasons of partisanship and because of their congenital dishonesty which contrasts so strongly with the rectitude, consistency and firm adherence to principle that marks the actions of the present Administration. It is true that during the period of Labour Government the Conservative Opposition were not instantly attracted to a statutory prices and incomes policy but confined themselves to a very temperate and moderate dissent on those rare occasions when they mentioned the issue and, once back in Government, they gave the issue further dispassionate consideration. As the economic successes piled one upon another and, judging to a nicety the exact moment when even more brilliant successes could be achieved by having the policy, the Government introduced a statutory prices and incomes policy.The successes of this policy have been staggering. It has been universally popular and internationally acclaimed. Some credit must be given to the moderation and steadiness of the splendid and reformed British trade union movement which has lived up to the very high opinion of it always entertained by Her Majesty's Ministers. Most of our admiration must be reserved, however, for the Government themselves. The time has now come to build an even more splendid edifice upon the foundations so well laid. The policy has already practically defeated inflation, smoothed out distortions in the labour market and introduced peace and order where only chaos reigned. Now is the moment to go forward and vanquish injustice.From now on the Pay Board will labour ceaselessly to redistribute income permanently to ensure that living standards can do nothing but rise for everyone and above all else provide justice, at the end of which time it may or may not cease to exist, depending upon whether any more noble tasks can be contrived for it to perform or whether, having solved all problems, it can be publicly exhibited to receive the cheers of the grateful populace.
That is the normal way that Ministers explain how they got themselves into
1110
this situation. It is a sad world. It is an ungrateful world. There is another account of what has been happening which, irritatingly enough for the Government, keeps being mentioned by a whole range of people many of whom have no connection with the Labour Party. It conflicts with the ministerial account at practically every point, and there seems to be a good deal of evidence to support it. It is my regrettable duty to put it to Ministers, however low my expectation that they are any longer capable of acknowledging reality.

First, as Ministers and all Government supporters know perfectly well, the whole policy is a flagrant reversal of everything ever said by official spokesmen of the Conservative Party up to the very day it was introduced. I could have sorted out a mass of quotations. To be truthful, I sorted out a mass of quotations—not forgetting the Chief Secretary—from Government Front Bench speakers, but I do not choose to cite any of those. I cite two from the debate on the original Prices and Incomes Bill in 1966 which did not even contain a mandatory provision. It contained only a notification provision. I quote from HANSARD, first from an Opposition amendment the end of which reads:
A Bill"—
that is, the 1966 Prices and Incomes Bill—
moreover which represents the first step down the slippery path of total socialistic control of processes which are best left to the moderate operation of the immutable laws of supply and demand"—[OFFICIAL REPORT, 14th July 1966; Vol. 731, c. 1742.]
I did not select any Front Bench occupant to quote from in the debate itself. I thought that I would quote the right hon. Member for Barnet (Mr. Maudling), not because I dislike him—quite the reverse; I like him very much—but because he is now being touted as the fellow who always believed in incomes policies. People said "The Tories have been receiving the proper advice from old Reggie, and he will shortly be back running it." After today, that would not surprise me. I shall read what he said when speaking to the Opposition amendment and I ask hon. Members to bear in mind that there was no compulsory element in in the Bill at that time, only a notification element.

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The right hon. Gentleman said:
There will be compulsory settlements of wage claims and compulsory checks on the level of prices. This is bound to lead down the slope to a complete Socialist State in this country. It is a little whimsical that the opposition to this process comes from the most Socialist members of the party opposite."—[OFFICIAL REPORT, 14th July 1966; Vol. 731, c. 1763.]
It is not for me to say what the right hon. Gentleman does or does not consider whimsical. If, however, he regards it as whimsical that certain members of the Labour Party did not choose to build Socialism in that way, perhaps he will drop me a line and supply an adjective for what he regards the present administration as being, in view of what they then said about an Act which did not have a compulsory element. So far has the Tory Party come, and the Tory Party knows it. The Pay Board is a peculiar body, and the more we clarify its functions the less clear, at least to me, does it become precisely who is running what.

For instance, the Secretary of State read out the Pay Board Chairman's explanation of what he did not say. In the Press I read that the Home Secretary had approved of the Glasgow firemen's settlement. It is not for the Home Secretary to approve it. The settlement should be referred to the Pay Board for its approval, and that has not yet been done.

But the Secretary of State stooped to give the board a heavy hint during the debate. He thought that the Glasgow firemen were splendid chaps—a sentiment with which we all agree—and that they were right to have persisted until they won a victory. It is not surprising, therefore, that the Press is already convinced that the Pay Board will endorse the settlement. Everybody knows that it will. Maybe it is a splendidly independent body, but of a kind that I have not previously noted.

By deliberate Government contrivance we shall not be able to debate that issue, because the Government have cooked up their legislation in such a way that individual decisions of the Pay Board are not debatable. We already have the issue of the Price Commission and whether it will bother to tell us what it is doing.

We know, too, that we cannot debate most of the awards—indeed, any
1112
individual awards—which the Pay Board makes. That is a deliberate contrivance to prevent Parliament from demonstrating the manifest absurdities and injustices which have been involved in Government policy all along, and which will occur again. I could list masses of them, but I shall not. Instead, I shall take some of the worst.

First, my hon. Friend the Member for Bristol, Central (Mr. Palmer) rightly raised the position of technical staff in the electrical power industry. What has been done there cannot conform even to common sense, let alone to justice or a sensible incomes policy. These chaps were trapped because the industrial section of their industry got its award before a calendar date was reached, whereas theirs came afterwards so they did not get it. They were as good as promised by the Minister that the anomaly would be rectified. He says that he did not promise it, and I take his word. But a lot of people thought that he had promised, including those in the electrical power industry. Now they cannot get it. A completely absurd differential exists between them and the men they direct. That is the first anomaly.

I am indebted to my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) for calling to my attention the position of the Ministry of Defence policemen. These men, who receive none of the normal rent allowances or free accommodation that the police in general quite rightly get, get only 85 per cent. of the normal police salary and they are said, by a series of independent reviews, to be as good policemen as one will find anywhere. A former Member of the House, Mr. John Horner, who used to represent Oldbury and Halesowen, is now one of their number. They lost out by three weeks. The absurdity has now arisen that, despite the promises that were made, they do not constitute a pay research procedure case, so they will not get anything.

The whole position of the police in London is highly undesirable. The entire police force of Wales could not fill the vacancies that exist in London. The Secretary of State says that we have to put up with the situation. I do not see why. Why the devil should we put up with the destruction of amenity by potty
1113
Whitehall differentials, established with-out any reference to what the Secretary of State calls the awful free-for-all to which his Government may one day choose to go back? Why should the man in Whitehall say that public servants will have to be treated worse than people elsewhere are treated? What is inevitable about this, and where is the justice and fairness in it?

I shall now switch to the labour market in general. I am indebted to the hon. Member for Oswestry. I often learn a great deal from Conservative hon. Members and I hope that sometimes the compliment is returned. In this case, however, I am entirely indebted to the hon. Member. He has called my attention to something that appears in the British Farmer and Stockbreeder. A couple of hundred men are coming over from New Zealand to work at milking for six to 12 months for £50 a week, whereas the minimum agricultural minimum wage is £25 a week. That is not the lump in the building industry; it is the lump in agriculture. It is a scandal. The hon. Member for Brighouse and Spenborough (Mr. Proudfoot), whom I greatly respect, says that there is marvellous mobility now. That is nonsense. It is not the sort of mobility we want.

I cannot resist reading this—the Mayday Service are the mob producing New Zealand milkmen:
Robin Gates, the irrepressible head of Mayday, claims to have been inundated with bookings by farmers.
I bet he has. All those men will work outside the operation of the code, whereas agricultural workers have to operate inside it. How can that be fair, sensible or just?

I could also cite en passant that the director of Westinghouse said:
many companies were seriously affected by skilled workers leaving for new jobs as the only way to beat the code and earn substantially more.
I have been a supporter of labour mobility all my life, but every hon. Member knows that that is not the sort of labour mobility we want. Everybody knows that that is being induced by the straitjacket into which the Government have pushed us.

Again on the subject of the labour market, I give the right hon. Member for
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Barnet another whimsicality to put with his others. The present Government have been the best recruiting sergeant that Mr. Clive Jenkins could possibly have had. That does not worry me or my hon. Friends, but it is a whimsicality. The Government have made union members, who were never before militant, extremely militant now. They have sent into industrial action union members who never before have engaged in industrial action. They have largely radicalised a whole section of white-collar workers—all to the great profit and advantage of Mr. Clive Jenkins.

It is a compliment to that man's political integrity that he actually wants to see a Labour Government returned, because he is doing very nicely under the present Government. I would like to have it explained to me how that can conform to any objective that the Government may have, even though it conforms to objectives that I and many of my hon. Friends have.

When talking about justice, equity and fairness I should like to quote from the Financial Times about the salary of the head of Plessey which has leapt by some astronomical sum. This is allowed by some extraordinary manipulations of the code. The code is a lousy code and it does not exist for the real world. It exists for the world in which Ministers live. The head of Plessey has thus been able to get a 37 per cent. commission increase—from the small sum of £47,518 last year to £65,175 this year.

The stage 3 consultative document says that justice and fairness and so on will play a large part.

That proves a simple proposition: that Sir John Clark has more sense and more delicacy than the Government, because under the Government's rules he would have been allowed to take it. Good for him that he did not!

"Justice", "fairness" and "equity" are dangerous words. I warn Conservative Members that they are usually the
1115
prelude to roaring wage inflation. Whenever people talk about being just, fair and equitable, they mean that they are going to dish it out with both hands.

It ought not to be the business of the Pay Board to redistribute income; that should be done through the tax system, and done properly next time. If it is not thought that there will be sufficient redistribution that way, property might be redistributed as well. If we are to enter into the great age of fairness—the new capitalism that the Secretary of State for Trade and Industry keeps talking about, this golden new era of man loving man—I suggest that it should be done that way rather than by the cumbersome operations of the Pay Board.

Finally, I refer to inflation. The injustices and absurdities of the policy will, of course, remain, and I have mentioned a few of them, but the general direction of the policy is towards the throwing-in of the counter-inflation towel. "Mr. Inflation" introduced the debate and "Mr. Counter-Inflation" will wind it up, and if the one's problems have been made simpler—though one would not have noticed it—the other's have certainly been made harder.

I do not know whether the Chairman of the Pay Board said 13 per cent. That is for ever shrouded in the mysteries that always accompany the Secretary of State's clarifications or explanations. Who said what to whom, and why he should be correcting the chairman's statement instead of the chairman himself correcting it, I leave aside. I say only that the Secretary of State will be lucky to get away with a 13 per cent. pay increase during the period under consideration. I suspect that he will have much sharper inflation than that and that he will have some "demand-pull" to add to the "cost-push". In the long term, that may be the greatest casualty of this whole procedure.

The hon. Member for Enfield, West (Mr. Parkinson) called for patriotism. He said we were all in the same boat and that nasty partisan arguments in the House reflected no credit on anybody. He asked why we could not have reasonable, straight statements as to where people stood. I tried to say to him—he would not let me interject, quite rightly if he did
1116
not want to—that that approach is never allowed to a Labour Government. Labour Governments are never allowed to appeal for a party truce on prices and incomes, or on any other issue. But apparently Tory Governments may say that the time has come for patriotism and plain speaking.

Perhaps, therefore, the House will listen to four minutes of plain speaking from me on the subject of incomes policies. I will keep it short—I wish that I could say more—but I believe that I will say enough to clear up any doubts about the Opposition's view of incomes policy. First, we face a great intellectual difficulty. Keynesianism is not working well as an explanation any longer. That is not necessarily a criticism of it, since it is now quite an ancient doctrine. It has saved the Western world in its time. It no longer explains some of the phenomena we face, but no economist has yet been able to provide a better critique. So the plain truth is that a large number of people, including myself, cannot predict with any certainty any of the things on which the Government claim to be infallible. If the Government would cease claiming to be infallible about them, that at least would be an improvement.

There is no firm evidence either way on the value of an incomes policy. I have read evidence demonstrating that having an incomes policy assists in countering inflation, and there is contrary evidence from other countries. There are even disputes about what has happened in this country. I do not regard the argument as proven. How any man in his right mind could say whether he would have an incomes policy in, say, circa 1982 is quite beyond me. I do not believe that the issue can be resolved that way. But if there is to be an incomes policy it should not be in its present form. There is a strong case for not having one at all.

If there is to be an incomes policy, two things must be done. First, it should be made voluntary. That is the only effective way to make it have any long-term impact. Secondly, following from that, an incomes policy is not a light development in which to get involved. It has to be continuous. One has to stick with it for a prolonged period. It is foolish to introduce it in a time of crisis and then dramatically to modify it or
1117
scrap it altogether when one is approaching an election or coming out of the crisis. All that that does is to alert trade unions every time to the fact that the mere mention of the words "incomes policy" will mean a severe drop in what their members might get in additional wage awards. That is the wrong way to have an incomes policy.

What the Opposition say, therefore, on the substantive issue is this. The Government could have chosen not to have an incomes policy at all. They once said that they were pledged to the hilt to do that. They could have chosen to have an incomes policy which made some kind of sense and with which they could consistently persevere. They have done neither the one nor the other. They have produced an anomalous, unjust, unfair, utterly muddled mess for which this country will suffer drastically for the next few years.

The hon. Member for Birmingham, All Saints (Mr. Brian Walden) has made a characteristically pugnacious and, no doubt to his supporters, effective speech. Apart from the last few words, however, it was a wholly negative, destructive speech. We were given no indication of what the hon. Gentleman, had he been in the position in which we found ourselves, would have done this time last year or what they would do now, except when he came right to the end when he said that the only way to introduce an effective incomes policy was to make it voluntary and make it last a long time.

In my innocence, I thought that that was what the hon. Gentleman's Government tried to do in 1965. That was what their declaration of intent was all about. How long did it last? How long did it remain voluntary? How long in the end did they keep it up?

The hon. Member knows, as do all his right hon. and hon. Friends, that, whatever one may say about the desirability of trying to achieve stability in prices and pay through that sort of method, it is exceedingly difficult. My right hon. Friends cannot be charged that they did not try. They tried for hour after hour, both last year and this. They tried to reach a voluntary arrangement with the
1118
principal parties. It is not the fault of my right hon. Friends that that did not succeed.

I am prepared to take up the hon. Gentleman's challenge and answer the central question with which the House is confronted tonight, namely, whether, in the present economic context, the Government are right to continue with their counter-inflation programme and whether the code is an effective and acceptable instrument. That is the question posed by the hon. Member for All Saints, and I am prepared to answer it.

The right hon. Member for Bristol, South-East (Mr. Benn) argued that we should abandon our policy because the whole exercise has failed. I cannot agree with that. If we compare what has been achieved with what might otherwise have happened, and if we look at the options which we faced at this time last year, we find that there is one crucial prize to which we can point—a prize which has always eluded the Labour Party. Despite the threat then posed by the ominous upward spiral of wages and prices, and despite the sharp adverse movement in the balance of payments, we have been able to maintain our growth strategy.

I ask Labour Members whether it is conceivable that domestic and overseas confidence could have been sustained through the year without a counter-inflation policy. Without that policy we should have had to deflate damagingly and sharply. We should have had to halt in its tracks——

I have only just started. We should have had to halt in its tracks the recovery of industrial investment, we should have had to face a sharp upturn in unemployment and, most disastrous of all, we should have had to destroy the prospects of the sustained growth of our economy upon which all our hopes for prosperity depend in the last resort.

Instead of what might have been, we have been able to stick to the policy of expansion. We have been able to sustain confidence, and we have been able to continue to raise the standards of living of our people. This is the real gain to Britain. I can agree with the hon. Member for All Saints that almost all of
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us here would much rather have seen this achieved without the complicated paraphernalia of a statutory policy. In the judgment of the Government this was not possible, and nor is it yet possible.

I am sorry to interrupt again, but the right hon. Gentleman persists in talking about growth. Will he explain why the Government have now decided to go from 5 per cent. to 3½ per cent? Why is that Government policy?

That was a matter which my right hon. Friend the Chancellor of the Exchequer dealt with fully on Monday. If we succeed, as I am confident we shall, in having a sustained 3½ per cent. growth rate, that will be nearly twice the rate which the Labour Government managed in the whole of their six years. But growth is not our only aim. There is no doubt that the rise in prices over the last 12 months, steep though it has been, has been markedly less than what would have happened if we had failed to take this firm action.

The tragedy is that that success has been almost wholly masked from view by the unprecedented rise in world commodity prices. My right hon. Friend the Chancellor of the Exchequer gave some figures for this in Monday's debate. Since January 1972, world food prices are up by over 60 per cent. World commodity prices—it bears repeating, if I may say so—are up by over 90 per cent. No Government can control these prices—[Interruption.]—and no Government can insulate the people from them. What we can do and have done is to keep to a minimum the effects of rising world prices. Between November, 1972 and August of this year, import prices rose by 24 per cent.—[Interruption.]

I was under the impression, from the words that I have heard from the hon. Member, that each time that he has risen it has been on a point of order. Therefore, in accordance with the custom of the House, I gave way. If that is not the case, I shall go on.

You invited me, Mr. Speaker, by referring to the fact that I was making comments from a sedentary position, to stand and interrupt the Minister. This I did, and the Minister gave way. Am I now in order in putting the point that I wish to make, from a standing position, to the Minister? [HoN. MEMBERS: "No."]

I can help the hon. Member. The position is very clear: he is not entitled to make sedentary interruptions. He is entitled to intervene from a standing position only if the Minister gives way. It is as clear as that.

Order. I should like the House to reflect. The hon. Member for Birmingham, All Saints (Mr. Brian Walden) was given a reasonable hearing. He made his case. It would be fair for the Minister to be given the same sort of hearing.

I will quote the figures, despite the efforts to make sure that they are not heard.

Between November 1972 and last August import prices rose by 24 pear cent. Over the same period, the wholesale price of manufactured products sold on the home market rose by 6.2 per cent., excluding, of course, the effect of the changeover to value added tax. Since last November, the prices of materials and fuels bought by manufacturing industry have risen by 32 per cent., but the increase in wholesale prices was 7.4 per cent.

The figures for food are even more striking, and perhaps I may correct the case put by the right hon. Member for Bristol, South-East. While no policy can control the price of fresh foods, we have controlled the price of manufactured foods. Between November last year and September this year, raw material costs of manufactured foods rose by 29 per cent., wholesale prices rose by 12 per cent. and retail prices rose by only 4.4 per cent.

Therefore, the Government can justly claim that the counter-inflation policy has succeeded. Not only has it offered some protection from the phenomenal rise in world prices, but the figures establish that we have been able to keep domestic costs under control. This analysis is borne out by the recent report of the Price Commission. It agreed that the main factor driving up prices was the rising cost of materials. But it also agreed that prices had risen less than raw material and fuel costs because continuing growth had enabled firms to keep down the rises in other costs per unit of output. This is why we are determined to adhere to our growth strategy.

The Price Commission went further. It reported that nearly one-third of all increases notified were withdrawn or re-
1122
jected and that another third were passed only after reductions had been made. In the first five months of operation, the commission has saved the consumer over £300 million at trade prices, and more than that at retail prices.

The question now is: do we abandon the controls or do we continue them with changes to make them more flexible and more acceptable, as provided in the order? There is only one responsible answer which can be given. Faced with the prospect that in the immediate future no conceivable voluntary policy would be compatible with the policy of containing inflation, the Government had no choice but to maintain the statutory controls. That is the harsh reality of the matter.

Those who argue that we should abandon the pay controls and rely on even more stringent price controls, as the hon. Member for Liverpool, Walton (Mr. Heffer) does, or, as others argue, that we should rely solely on monetary and fiscal restraint, must ask themselves what the consequences of those policies would be. There are few outside the Labour Party who believe that price controls without pay controls would be anything other than a recipe for disaster, and I suspect that the Opposition do not even convince themselves.

Those who argue for monetary restraint and deflation—here I agree with what my hon. Friend the Member for Enfield, West (Mr. Parkinson) said in a powerful speech—must acknowledge that the cost would be heavy in growth forgone, in rising unemployment and, I believe, in social stress. Indeed, all the evidence of the post-war era has been that to rely on deflation to contain pay increases except at moments of crisis only makes the situation worse. It is when people cannot see the prospect of reasonable increases in their standard of living that they become determined to seize them by hook or by crook. In this way is the main purpose of the deflation defeated.

Throughout the talks which the Government have had with the CBI and the TUC there has always been unanimous agreement that the containment of inflation will be achieved only if the economy continues to grow. We must have growth if counter-inflation is to succeed—and if it succeeds we can look forward to sustained growth in the future. That is what
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our policy and the order are all about. I reject the methods either of relying on higher taxation and subsidies or of relying exclusively on monetary policy alone.

The problem of London has been raised. I realise, of course, that the problem of labour supply in the public services in London is causing a good deal of anxiety. I must say, however, that it does not seem to me to be helped at all by the kind of political stunt we saw at County Hall yesterday. The Labour majority on the GLC seems to be trying to turn itself into a kind of Metropolitan Clay Cross. But I think there has been a considerable degree of misunderstanding about the causes of London's labour supply problems. These have certainly not been created by the counter-inflation policy, and it is not realistic to expect that policy to resolve them. On the contrary, in an area where there is an acute shortage of labour no one gains by the uncontrolled bidding-up of pay, and I should have thought all experience teaches that in such an atmosphere the public services inevitably fare the worst. Such a bidding-up would merely add to inflation and, so far from increasing the supply of labour to the public services, would inevitably reduce it still further.

The hon. Gentleman says, "Absolute rubbish!" but I can assure him that if we had not had these controls last year the position of the labour supply in London, of the transport and all the rest, would have been very much worse than it is.

I did not say anything of the sort. We are discussing this order in the circumstances in which we find ourselves today. But, of course, we have referred to the Pay Board the question of the London weighting and, as the Home Secretary said the other day, we are trying to secure that report just as soon as we can. About weighting, I am sorry that I did not hear the speech of my hon. Friend the Member for Aberdeenshire, East (Mr. Wolrige-Gordon) about the problem caused in his part of the world by the growth of the oil industry. But I
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must say that there the solution must lie in the redeployment of labour in Scotland, particularly from the areas of high unemployment, rather than in a general bidding-up of pay by making exceptions.

My hon. Friend the Member for Liverpool, Garston (Mr. Fortescue) and my hon. and learned Friend the Member for Dover (Mr. Peter Rees) raised the question of the base date to be used in paragraph 34 of the code for what is called the profit margin safeguard. Again, I am sorry that I did not hear the speech of my hon. Friend the Member for Garston, but I recognise that this is indeed an important point. Perhaps I may say to him that enterprises have a choice of reference periods, and, therefore, of profit margins, but inevitably this choice is not wide enough to satisfy everyone. As my hon. Friend mentioned, food manufacturers argue that the code should be amended to make 30th September 1972 generally available as a base date. They are coming to see my right hon. Friend the Minister of Agriculture to discuss this very point with him. He will, of course, consider their case carefully, but I cannot anticipate the outcome of that discussion. Obviously, there is a variety of factors which the Government will have to take into account, including the claims of investment, on the one hand, and the possible effect of prices, on the other.

My hon. Friend the Member for Truro (Mr. Dixon), who sent me a note to apologise for the fact that he could not be here for the wind-up tonight, voiced doubts whether the Government's estimate of the increase in earnings during stage 3, given in the consultative document, is right. He asked whether it takes full account of all the increases above the pay limit for unsocial hours and similar matters that are not specifically mentioned in paragraph 34 of Part I of the consultative document. I can reassure my hon. Friend. The words that appear in the paragraph from which he quoted include all the items he mentioned, such as unsocial hours, New Year's Day, London weighting and so on. They do not include anything for, as it were, excess efficiency arrangements, because we are satisfied that the safeguards which we have built in for efficiency payments will mean that they are all genuine.

I want to deal with the question of notifications and announcements, because
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important questions were raised this afternoon and I want to try to help the House. The right hon. Member for Bristol, South-East referred to the changes we have made in the arrangements for notifying applications for price increases. In order to strengthen the policy, we have extended to Category II companies the pre-notification system. This adds about 600 medium-sized firms to the pre-notification category. They are manufacturers with sales between £5 million and £50 million per year, and providers of services with a turnover of between £5 million and £20 million. This is an important strengthening of the enforcement of price controls. Instead of merely reporting after the event, they must now notify and justify price increases 14 days before the event. The other main change is that the Price Commission will no longer give specific approvals to price increases pre-notified to it.

Before I come to the precise question, which I understood very clearly, asked by the right hon. Member for Bristol, South-East, may I make a few general comments about this change in our procedure. I believe that the criticisms of the change are entirely misplaced. It never was our intention that the Price Commission should be seen in the eyes of the public as an instrument for approving price increases. On the contrary—and this is the basis on which our debates on the Bill have proceeded—its rôle is to scrutinise and, if necessary, reject price increases if they are inconsistent with the code.

There is not the slightest doubt that during stage 2 the Price Commission has been widely misunderstood by the public, almost entirely because it felt itself obliged, under the notification procedure, to announce approvals. The fact is that the responsibility for announcing increases in prices rests, and must rest firmly, upon the firms which make them and not upon the Price Commission.

The right hon. Gentleman is saying what was said by the Secretary of State for Trade and Industry. What we want to know is this. How is the public, or how are Members of Parliament, to know the difference between those price increases which have got through because there is a lapse of time and those which have been specifically
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considered by the commission and it has decided not to restrict or reject them? That is what we must know. Otherwise we shall not know what the Price Commission is doing.

That is a wholly different question from what the right hon. Gentleman asked this afternoon. May I first finish what I was saying.

The responsibility for announcing prices must rest on the firms. Accordingly, in stage 3 companies will still pre-notify price increases to the commission, and the commission will have a specified period in which to restrict or reject them if they are inconsistent with the code. Except where the commission exercises its discretion—for instance, for one of the investment clauses—no express approval will be given. The hon. Member for Islington, East (Mr. John Grant) has described this as a gag. It is nothing of the sort. It is a straightforward administrative change designed to fulfil the intentions of the Government and of the House.

The Price Commission will continue to make public information and advice about the application of the price code. It will continue to make quarterly reports to the Minister which must be laid before Parliament. It must continue to issue information about notifications which have been rejected, withdrawn or notified. In addition, when it rolls back prices found to be contrary to the code, this roll-hack, too, will be announced.

It is the function of the Price Commission to restrain price increases. The amended procedures, which the commission itself has sought, will better enable the public to see its function for what it is.

I now come to the specific question which the right hon. Member for Bristol, South-East asked this afternoon—a part of the debate which seemed to me to generate a great deal more heat than light. The question was how a member of the public, or a Member of Parliament, can satisfy himself, where a particular price has been raised, that this is in order.

There is nothing in the new procedure to alter in any way the right of a Member of Parliament or a member of the
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public to make a formal complaint to the commission about a suspect price increase. Many hon. Members, particularly, I imagine, if it involves a firm in their own constituency, would prefer to contact the firm first. This would be right, because, as my right hon. Friend said this afternoon, it is for the firm to justify its own price increase. If after this—and I come to the right hon. Gentleman's specific question—a member of the public or a Member of Parliament still feels dissatisfied, he can make a formal complaint to the commission, either to the headquarters in London or to one of the regional offices, and the complaint will be investigated and the person informed. If as a result of the complaint the price rise is found to be unjustified, it can be rolled back. That is a new procedure which actually strengthens the powers to control prices. [Interruption.]

The right hon. Member for Bristol, South-East, will remember that the Act has a section in it which provides that express approval under the old notification order would in most cases be a bar to rolling back the price increases if subsequently it turned out that the price rise, for instance, took the firm above its net profit margin reference level. It might not in those circumstances be able to roll the price back.

Under the new procedure, responsibility for making the price rise rests with the firm, and the fact that the notification period has elapsed is no bar whatever to the commission rolling the price back later if it proves to be inconsistent with the code. So far from weakening price control, the new procedure actually strengthens it—[Interruption.]

Will the right hon. Gentleman now answer two questions I put to him? First, if a Member of Parliament asks the commission what price increases it has considered and what its judgment on them was, will he get a truthful and complete answer? Secondly, if a price is increased by a firm and the firm does not announce it, how are we to know it has been approved or has not been rejected or restricted? If a firm says it has been to the Price Commission, will the com-
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mission confirm what the firm has said in its public statement?

The question which the right hon. Gentleman has now asked me is totally different from that which he put to me this afternoon. I have answered his original question. [Interruption.] He has asked how Members of Parliament would know that price increases had been considered by the commission. In category I cases these will be individually reported as usual in the quarterly reports of the Price Commission. As for his second question, it will be for the firm to announce the price increase. If a price has risen and it is suspected that it may be inconsistent with the code, it is open not only to any Member of Parliament but to any member of the public to get in touch with the commission to make a formal complaint, whereupon that price rise will be investigated and the results made known. [Interruption.]

When will the right hon. Gentleman answer the question? The question is not about whether there is a Member of Parliament with a complaint but whether we are to be told by the Price Commission whether an individual price has been considered and whether it has been restricted or rejected. That is a matter of fact.